Some Analysts Just Cut Their Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) Estimates

The analysts covering Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the consensus from dual analysts covering Schnitzer Steel Industries is for revenues of US$2.9b in 2023, implying a definite 15% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$3.4b of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on Schnitzer Steel Industries, given the substantial drop in revenue estimates.

View our latest analysis for Schnitzer Steel Industries

There was no particular change to the consensus price target of US$57.50, with Schnitzer Steel Industries' latest outlook seemingly not enough to result in a change of valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Schnitzer Steel Industries, with the most bullish analyst valuing it at US$76.00 and the most bearish at US$45.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 12% by the end of 2023. This indicates a significant reduction from annual growth of 9.5% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 0.5% per year. The forecasts do look bearish for Schnitzer Steel Industries, since they're expecting it to shrink faster than the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for next year. Analysts also expect revenues to shrink faster than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Schnitzer Steel Industries after today.

Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Schnitzer Steel Industries that suggests the company could be somewhat overvalued. You can learn more about our valuation methodology for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.