Here's What Analysts Are Forecasting For Kumba Iron Ore Limited (JSE:KIO) After Its Annual Results

Shareholders of Kumba Iron Ore Limited (JSE:KIO) will be pleased this week, given that the stock price is up 12% to R386 following its latest annual results. Results look mixed - while revenue fell marginally short of analyst estimates at R69b, statutory earnings were in line with expectations, at R45.70 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Kumba Iron Ore

After the latest results, the ten analysts covering Kumba Iron Ore are now predicting revenues of R69.9b in 2025. If met, this would reflect an okay 2.1% improvement in revenue compared to the last 12 months. Per-share earnings are expected to bounce 25% to R57.26. Yet prior to the latest earnings, the analysts had been anticipated revenues of R71.8b and earnings per share (EPS) of R54.69 in 2025. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

There's been no real change to the average price target of R375, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. The most optimistic Kumba Iron Ore analyst has a price target of R487 per share, while the most pessimistic values it at R270. 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. It's clear from the latest estimates that Kumba Iron Ore's rate of growth is expected to accelerate meaningfully, with the forecast 2.1% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 0.2% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.8% per year. So it's clear that despite the acceleration in growth, Kumba Iron Ore is expected to grow meaningfully slower than the industry average.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Kumba Iron Ore's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Kumba Iron Ore. Long-term earnings power is much more important than next year's profits. We have forecasts for Kumba Iron Ore going out to 2027, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for Kumba Iron Ore that we have uncovered.

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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.