Earnings Miss: Champion Iron Limited Missed EPS And Analysts Are Revising Their Forecasts
It's been a sad week for Champion Iron Limited (ASX:CIA), who've watched their investment drop 13% to AU$3.41 in the week since the company reported its quarterly result. Revenues missed expectations, with revenue of CA$357m falling 18% short of forecasts. Earnings correspondingly dipped, with Champion Iron reporting a statutory loss of CA$0.07 per share, where the analysts were expecting a profit. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Champion Iron's 13 analysts are now forecasting revenues of CA$1.86b in 2027. This would be a credible 6.9% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to jump 50% to CA$0.28. Before this earnings report, the analysts had been forecasting revenues of CA$1.96b and earnings per share (EPS) of CA$0.35 in 2027. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
View our latest analysis for Champion Iron
The consensus price target fell 11% to AU$4.97, with the weaker earnings outlook clearly leading valuation estimates. 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 Champion Iron at AU$6.77 per share, while the most bearish prices it at AU$3.39. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. The analysts are definitely expecting Champion Iron's growth to accelerate, with the forecast 9.4% annualised growth to the end of 2027 ranking favourably alongside historical growth of 4.5% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Champion Iron is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Champion Iron. They also downgraded Champion Iron's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Champion Iron. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Champion Iron going out to 2029, and you can see them free on our platform here..
It is also worth noting that we have found 1 warning sign for Champion Iron that you need to take into consideration.
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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.