Last week saw the newest full-year earnings release from Element Solutions Inc (NYSE:ESI), an important milestone in the company's journey to build a stronger business. 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. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Element Solutions after the latest results.
Taking into account the latest results, the consensus forecast from Element Solutions' eight analysts is for revenues of US$2.45b in 2024. This reflects an okay 4.9% improvement in revenue compared to the last 12 months. Per-share earnings are expected to surge 56% to US$0.75. In the lead-up to this report, the analysts had been modelling 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 real cut to 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. 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. Currently, the most bullish analyst values Element Solutions at US$30.00 per share, while the most bearish prices it at US$22.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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 pretty clear that there is an expectation that Element Solutions' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.9% growth on an annualised basis. This is compared to a historical growth rate of 7.4% over the past 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. So it's pretty clear that, while Element Solutions' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Element Solutions. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$26.44, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Element Solutions going out to 2026, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for Element Solutions (of which 1 is significant!) you should know about.
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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.