Results: Sasol Limited Exceeded Expectations And The Consensus Has Updated Its Estimates

Sasol Limited (JSE:SOL) investors will be delighted, with the company turning in some strong numbers with its latest results. It was overall a positive result, with revenues beating expectations by 5.8% to hit R120b. Sasol also reported a statutory profit of R23.68, which was an impressive 28% above what the analysts had forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Sasol

Following last week's earnings report, Sasol's nine analysts are forecasting 2022 revenues to be R227.1b, approximately in line with the last 12 months. Per-share earnings are expected to shoot up 201% to R45.34. In the lead-up to this report, the analysts had been modelling revenues of R230.0b and earnings per share (EPS) of R44.31 in 2022. So the consensus seems to have become somewhat more optimistic on Sasol's earnings potential following these results.

The consensus price target was unchanged at R330, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Sasol at R450 per share, while the most bearish prices it at R220. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 2.4% by the end of 2022. This indicates a significant reduction from annual growth of 4.0% 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 2.0% annually for the foreseeable future. It's pretty clear that Sasol's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Sasol's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at R330, 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 Sasol. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Sasol going out to 2024, and you can see them free on our platform here..

You still need to take note of risks, for example - Sasol has 3 warning signs we think you should be aware of.

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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.