Earnings Miss: Element Solutions Inc Missed EPS By 13% And Analysts Are Revising Their Forecasts

Element Solutions Inc (NYSE:ESI) last week reported its latest yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues were in line with forecasts, at US$2.3b, although statutory earnings per share came in 13% below what the analysts expected, at US$0.49 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Element Solutions

Taking into account the latest results, the most recent consensus for Element Solutions from eight analysts is for revenues of US$2.45b in 2024. If met, it would imply an okay 4.9% increase on its revenue over the past 12 months. Per-share earnings are expected to surge 56% to US$0.75. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.49b and earnings per share (EPS) of US$0.87 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$26.44, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. The most optimistic Element Solutions analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$22.00. 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 Element Solutions shareholders.

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. We would highlight that Element Solutions' revenue growth is expected to slow, with the forecast 4.9% annualised growth rate until the end of 2024 being well below the historical 7.4% p.a. growth over the last five years. Compare this to the 130 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 4.4% per year. Factoring in the forecast slowdown in growth, it looks like Element Solutions is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Element Solutions going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Element Solutions (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

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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.