Earnings Release: Here's Why Analysts Cut Their Ramaco Resources, Inc. (NASDAQ:METC) Price Target To US$21.25

One of the biggest stories of last week was how Ramaco Resources, Inc. (NASDAQ:METC) shares plunged 21% in the week since its latest quarterly results, closing yesterday at US$12.95. Revenues beat expectations, coming in 2.7% ahead of forecasts, and the company broke even on a statutory earnings per share (EPS) level. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Ramaco Resources after the latest results.

View our latest analysis for Ramaco Resources

Taking into account the latest results, the most recent consensus for Ramaco Resources from three analysts is for revenues of US$762.0m in 2024. If met, it would imply a meaningful 8.9% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 128% to US$2.42. In the lead-up to this report, the analysts had been modelling revenues of US$804.4m and earnings per share (EPS) of US$2.32 in 2024. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.

The analysts have cut their price target 8.6% to US$21.25per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings. 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. There are some variant perceptions on Ramaco Resources, with the most bullish analyst valuing it at US$22.00 and the most bearish at US$20.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Ramaco Resources is an easy business to forecast or the the analysts are all using similar assumptions.

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 Ramaco Resources' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 30% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.0% per year. So it's pretty clear that, while Ramaco Resources' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Ramaco Resources' earnings potential next year. They also downgraded Ramaco Resources' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Ramaco Resources' future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Ramaco Resources going out to 2026, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Ramaco Resources that 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.