Norske Skog ASA (OB:NSKOG) Just Released Its Second-Quarter Earnings: Here's What Analysts Think

Shareholders will be ecstatic, with their stake up 23% over the past week following Norske Skog ASA's (OB:NSKOG) latest quarterly results. The results were positive, with revenue coming in at kr3.9b, beating analyst expectations by 9.0%. 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 Norske Skog

Following the latest results, Norske Skog's three analysts are now forecasting revenues of kr15.0b in 2022. This would be a meaningful 19% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to increase 5.6% to kr14.74. Yet prior to the latest earnings, the analysts had been anticipated revenues of kr13.7b and earnings per share (EPS) of kr15.89 in 2022. So it's pretty clear consensus is mixed on Norske Skog after the latest results; whilethe analysts lifted revenue numbers, they also administered a minor downgrade to per-share earnings expectations.

There's been no major changes to the price target of kr90.00, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Norske Skog at kr100.00 per share, while the most bearish prices it at kr80.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Norske Skog is an easy business to forecast or the the analysts are all using similar assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Norske Skog is forecast to grow faster in the future than it has in the past, with revenues expected to display 41% annualised growth until the end of 2022. If achieved, this would be a much better result than the 6.0% annual decline over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 1.1% annually. So it looks like Norske Skog is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Norske Skog. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at kr90.00, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Norske Skog. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Norske Skog analysts - going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Norske Skog , and understanding these should be part of your investment process.

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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.