Investors in Stepan Company (NYSE:SCL) had a good week, as its shares rose 3.9% to close at US$89.05 following the release of its quarterly results. Revenues of US$551m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of US$0.61 an impressive 110% ahead of estimates. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Stepan after the latest results.
Taking into account the latest results, the consensus forecast from Stepan's four analysts is for revenues of US$2.30b in 2024. This reflects a satisfactory 3.5% improvement in revenue compared to the last 12 months. Per-share earnings are expected to jump 61% to US$2.72. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.30b and earnings per share (EPS) of US$2.61 in 2024. So the consensus seems to have become somewhat more optimistic on Stepan's earnings potential following these results.
The consensus price target was unchanged at US$102, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. There are some variant perceptions on Stepan, with the most bullish analyst valuing it at US$104 and the most bearish at US$100.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Stepan is an easy business to forecast or the the analysts are all using similar assumptions.
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. It's pretty clear that there is an expectation that Stepan's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.7% growth on an annualised basis. This is compared to a historical growth rate of 7.7% over the past five years. Compare this to the 127 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 4.9% per year. So it's pretty clear that, while Stepan's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Stepan following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$102, 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. We have forecasts for Stepan going out to 2025, 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 Stepan 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.