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Market forces rained on the parade of Arch Resources, Inc. (NYSE:ARCH) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the consensus from five analysts covering Arch Resources is for revenues of US$2.6b in 2024, implying a considerable 10% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to dive 21% to US$14.09 in the same period. Before this latest update, the analysts had been forecasting revenues of US$2.6b and earnings per share (EPS) of US$14.73 in 2024. So it looks like there's been a small decline in overall sentiment after the new consensus numbers - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
See our latest analysis for Arch Resources
It might be a surprise to learn that the consensus price target was broadly unchanged at US$182, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 20% by the end of 2024. This indicates a significant reduction from annual growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Arch Resources is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data indicates that Arch Resources' revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Arch Resources after today.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Arch Resources analysts - going out to 2026, and you can see them free on our platform here.