What Does The Future Hold For Caesarstone Ltd. (NASDAQ:CSTE)? These Analysts Have Been Cutting Their Estimates

One thing we could say about the analysts on Caesarstone Ltd. (NASDAQ:CSTE) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the latest downgrade, Caesarstone's two analysts currently expect revenues in 2023 to be US$694m, approximately in line with the last 12 months. Per-share earnings are expected to soar 46% to US$0.54. Previously, the analysts had been modelling revenues of US$776m and earnings per share (EPS) of US$1.09 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

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The consensus price target fell 34% to US$9.50, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Caesarstone, with the most bullish analyst valuing it at US$12.00 and the most bearish at US$9.00 per share. 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 Caesarstone shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 0.9% by the end of 2023. This indicates a significant reduction from annual growth of 2.4% 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 3.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Caesarstone is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Caesarstone's revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Caesarstone after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform 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.