Orica Limited Just Recorded A 95% EPS Beat: Here's What Analysts Are Forecasting Next

Investors in Orica Limited (ASX:ORI) had a good week, as its shares rose 3.3% to close at AU$18.30 following the release of its interim results. Revenues of AU$3.7b fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of AU$0.72 an impressive 95% ahead of estimates. 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 Orica after the latest results.

View our latest analysis for Orica

Taking into account the latest results, the most recent consensus for Orica from 13 analysts is for revenues of AU$7.84b in 2024. If met, it would imply an okay 3.1% increase on its revenue over the past 12 months. Statutory per share are forecast to be AU$1.03, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of AU$8.15b and earnings per share (EPS) of AU$1.07 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

What's most unexpected is that the consensus price target rose 9.6% to AU$20.14, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Orica, with the most bullish analyst valuing it at AU$22.00 and the most bearish at AU$17.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Orica's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 6.2% growth on an annualised basis. This is compared to a historical growth rate of 8.5% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.6% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Orica.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Orica. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Orica analysts - going out to 2026, and you can see them free on our platform here.

Even so, be aware that Orica is showing 1 warning sign in our investment analysis , 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.