Downgrade: Here's How Analysts See Yara International ASA (OB:YAR) Performing In The Near Term

The latest analyst coverage could presage a bad day for Yara International ASA (OB:YAR), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the consensus from Yara International's 15 analysts is for revenues of US$18b in 2023, which would reflect a chunky 9.2% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to plunge 27% to US$2.79 in the same period. Previously, the analysts had been modelling revenues of US$19b and earnings per share (EPS) of US$4.66 in 2023. The forecasts seem less optimistic after the new consensus numbers, with lower sales estimates and making a pretty serious decline to earnings per share forecasts.

See our latest analysis for Yara International

Analysts made no major changes to their price target of kr421, suggesting the downgrades are not expected to have a long-term impact on Yara International's 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. Currently, the most bullish analyst values Yara International at kr520 per share, while the most bearish prices it at kr320. 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 Yara International shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Yara International's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 18% by the end of 2023. This indicates a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.9% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Yara International is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Yara International. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Yara International's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Yara International after the downgrade.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Yara International, including a weak balance sheet. Learn more, and discover the 1 other warning sign we've identified, for free on our platform here.

We also provide an overview of the Yara International Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.