Anglo American plc Just Missed Earnings - But Analysts Have Updated Their Models

The analysts might have been a bit too bullish on Anglo American plc (LON:AAL), given that the company fell short of expectations when it released its yearly results last week. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$35b, statutory earnings missed forecasts by an incredible 21%, coming in at just US$3.68 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Anglo American

Taking into account the latest results, the consensus forecast from Anglo American's 14 analysts is for revenues of US$37.3b in 2023, which would reflect an okay 6.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to step up 15% to US$4.29. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$36.6b and earnings per share (EPS) of US$4.37 in 2023. There doesn't appear to have been a major change in sentiment following the results, other than the modest lift to revenue estimates.

Even though revenue forecasts increased, there was no change to the consensus price target of UK£34.35, suggesting the analysts are focused on earnings as the driver of value creation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Anglo American, with the most bullish analyst valuing it at UK£43.43 and the most bearish at UK£25.90 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Anglo American shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Anglo American's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 6.3% growth on an annualised basis. This is compared to a historical growth rate of 8.4% over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 0.5% per year. Factoring in the forecast slowdown in growth, it's pretty clear that Anglo American is still expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Anglo American. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Anglo American going out to 2025, and you can see them free on our platform here..

Before you take the next step you should know about the 2 warning signs for Anglo American that we have uncovered.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.