China Steel Corporation Just Recorded A 5.9% EPS Beat: Here's What Analysts Are Forecasting Next

China Steel Corporation (TWSE:2002) last week reported its latest second-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. The result was positive overall - although revenues of NT$95b were in line with what the analysts predicted, China Steel surprised by delivering a statutory profit of NT$0.09 per share, modestly greater than expected. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for China Steel

Following the recent earnings report, the consensus from seven analysts covering China Steel is for revenues of NT$353.7b in 2024. This implies a noticeable 3.1% decline in revenue compared to the last 12 months. Statutory earnings per share are expected to reduce 9.6% to NT$0.20 in the same period. Before this earnings report, the analysts had been forecasting revenues of NT$376.6b and earnings per share (EPS) of NT$0.44 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a pretty serious reduction to earnings per share numbers.

Despite the cuts to forecast earnings, there was no real change to the NT$25.16 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 China Steel at NT$28.00 per share, while the most bearish prices it at NT$19.80. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 6.1% by the end of 2024. This indicates a significant reduction from annual growth of 2.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.4% annually for the foreseeable future. It's pretty clear that China Steel's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for China Steel. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at NT$25.16, 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 China Steel. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple China Steel analysts - going out to 2026, and you can see them free on our platform here.

Even so, be aware that China Steel is showing 1 warning sign in our investment analysis , 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.