Investors in Sensient Technologies Corporation (NYSE:SXT) had a good week, as its shares rose 3.6% to close at US$83.34 following the release of its quarterly results. Sensient Technologies beat revenue forecasts by a solid 14% to hit US$360m. Statutory earnings per share came in at US$0.75, in line with expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the consensus from Sensient Technologies' four analysts is for revenues of US$1.30b in 2021, which would reflect a measurable 3.2% decline in sales compared to the last year of performance. Statutory per-share earnings are expected to be US$2.85, roughly flat on the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.28b and earnings per share (EPS) of US$2.72 in 2021. So the consensus seems to have become somewhat more optimistic on Sensient Technologies' earnings potential following these results.
The consensus price target was unchanged at US$87.00, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sensient Technologies, with the most bullish analyst valuing it at US$110 and the most bearish at US$71.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 1.0% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 4.2% decline in revenue until the end of 2021. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.7% per year. So while a broad number of companies are forecast to grow, unfortunately Sensient Technologies is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Sensient Technologies following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Sensient Technologies' revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$87.00, 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 Sensient Technologies. Long-term earnings power is much more important than next year's profits. We have forecasts for Sensient Technologies going out to 2025, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Sensient Technologies you should know about.
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