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Venator Materials PLC Just Reported A Surprise Profit And Analysts Updated Their Estimates

It's been a pretty great week for Venator Materials PLC (NYSE:VNTR) shareholders, with its shares surging 17% to US$1.40 in the week since its latest quarterly results. Although revenues of US$532m were in line with analyst expectations, Venator Materials surprised on the earnings front, with an unexpected (statutory) profit of US$0.07 per share a nice improvement on the losses that the analystsforecast. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Venator Materials

NYSE:VNTR Past and Future Earnings May 11th 2020
NYSE:VNTR Past and Future Earnings May 11th 2020

Following the recent earnings report, the consensus from ten analysts covering Venator Materials is for revenues of US$1.92b in 2020, implying an uncomfortable 8.4% decline in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 93% to US$0.11. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$2.03b and losses of US$0.036 per share in 2020. So it's pretty clear the analysts have mixed opinions on Venator Materials after this update; revenues were downgraded and per-share losses expected to increase.

The consensus price target fell 15% to US$2.06, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Venator Materials at US$5.00 per share, while the most bearish prices it at US$1.20. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. Over the past three years, revenues have declined around 0.7% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 8.4% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 4.6% next year. So while a broad number of companies are forecast to decline, unfortunately Venator Materials is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.

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 Venator Materials going out to 2023, and you can see them free on our platform here..

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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