Analysts Have Made A Financial Statement On Fortescue Ltd’s (ASX:FMG) Half-Year Report

Feb 28, 2024

As you might know, Fortescue Ltd (ASX:FMG) recently reported its interim numbers. Results look mixed – while revenue fell marginally short of analyst estimates at US$9.5b, statutory earnings were in line with expectations, at US$1.08 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Fortescue

ASX:FMG Earnings and Revenue Growth February 25th 2024

Taking into account the latest results, the current consensus from Fortescue’s 13 analysts is for revenues of US$19.1b in 2024. This would reflect a satisfactory 3.2% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to ascend 19% to US$2.23. In the lead-up to this report, the analysts had been modelling revenues of US$19.4b and earnings per share (EPS) of US$2.16 in 2024. So the consensus seems to have become somewhat more optimistic on Fortescue’s earnings potential following these results.

The consensus price target was unchanged at AU$22.11, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. The most optimistic Fortescue analyst has a price target of AU$25.93 per share, while the most pessimistic values it at AU$17.40. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s pretty clear that there is an expectation that Fortescue’s revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 6.5% growth on an annualised basis. This is compared to a historical growth rate of 13% 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) 0.5% per year. So it’s pretty clear that, while Fortescue’s 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 Fortescue’s earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at AU$22.11, with the latest estimates not enough to have an impact on their price targets.

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. At Simply Wall St, we have a full range of analyst estimates for Fortescue going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we’ve discovered 2 warning signs for Fortescue (1 makes us a bit uncomfortable!) that you should be aware of.

Valuation is complex, but we’re helping make it simple.

Find out whether Fortescue is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

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