Analysts Have Made A Financial Statement On Elkem ASA's (OB:ELK) First-Quarter Report

Elkem ASA (OB:ELK) just released its latest first-quarter report and things are not looking great. It was a pretty negative result overall, with revenues of kr8.0b missing analyst predictions by 3.7%. Worse, the business reported a statutory loss of kr0.69 per share, much larger than the analysts had forecast prior to the result. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Elkem

Taking into account the latest results, the current consensus from Elkem's five analysts is for revenues of kr35.4b in 2024. This would reflect a notable 8.9% increase on its revenue over the past 12 months. Earnings are expected to improve, with Elkem forecast to report a statutory profit of kr0.79 per share. In the lead-up to this report, the analysts had been modelling revenues of kr36.1b and earnings per share (EPS) of kr1.45 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the kr25.60 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Elkem at kr30.00 per share, while the most bearish prices it at kr20.00. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 12% growth on an annualised basis. That is in line with its 14% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 3.4% annually. So it's pretty clear that Elkem is forecast to grow substantially faster than its industry.

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. They also downgraded Elkem's revenue estimates, but industry data suggests that it is expected to grow faster 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Elkem analysts - going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Elkem you should know about.

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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.