Results: Nippon Steel Corporation Exceeded Expectations And The Consensus Has Updated Its Estimates

As you might know, Nippon Steel Corporation (TSE:5401) recently reported its first-quarter numbers. Revenues were JP¥2.2t, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at JP¥169, an impressive 39% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Nippon Steel

Following last week's earnings report, Nippon Steel's ten analysts are forecasting 2025 revenues to be JP¥8.93t, approximately in line with the last 12 months. Statutory earnings per share are expected to dive 30% to JP¥393 in the same period. Before this earnings report, the analysts had been forecasting revenues of JP¥8.98t and earnings per share (EPS) of JP¥403 in 2025. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at JP¥4,005, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Nippon Steel, with the most bullish analyst valuing it at JP¥4,700 and the most bearish at JP¥2,600 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Nippon Steel's revenue growth is expected to slow, with the forecast 1.1% annualised growth rate until the end of 2025 being well below the historical 11% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.4% annually. Factoring in the forecast slowdown in growth, it seems obvious that Nippon Steel is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse 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 Nippon Steel. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Nippon Steel analysts - going out to 2027, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Nippon Steel that you need to be mindful of.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com