1) Annual Revenue Target
Q1-21 Revenue = US$39.8M
Q2-21 Revenue = US$54.3M
Q1 + Q2 Rev = US$94.1M
Analyst Annual Revenue consensus = C$246.4 = US$197.1 (US$1 = C$1.25)
So Largo needs to realise US$103M in sales in H2 to meet the analyst annual revenue consensus.
Can they do it?
Back-of-the-envelope Scenario
Actual Q3-21 sales volume = 2,685 T = 5.9M lbs
Estimated Q4-21 sales volume based on revised Guidance = 2,705 T to 3,305 T, with Mid-volume = 3,005 = 6.6M lbs
Let’s assume that average sales revenue per pound for Q3 = US$9.20
Estimated Q2 Sales Revenue = US$9.2 x 5.9M lbs = US$54.3M
Let’s assume that average sales revenue per pound for Q4 = US$8.0
Estimated Q2 Sales Revenue = US$8.0 x 6.6M lbs = US$52.8M
In this Scenario the estimated H2 sales revenue = 54.3M + 52.8M = US$107.1M which is more than the US$103M needed to meet the analyst annual revenue consensus as indicated above.
Conclusion: Imho, Largo will likely meet the analyst mean revenue target for 2021.
2) EPS Annual Target
How about the annual EPS target?
EPS target is more difficult to reach because of such variables as cost efficiency, tax obligations and fX gain / loss.
Q3-21 Analyst EPS consensus estimate = C$0.29 = US$0.23
Q4-21Analyst EPS consensus estimate = C$0.41 = US$0.33
Annual Analyst EPS consensus estimate = C$0.80 = US$0.64
Note: Annual Analyst EPS estimates:
Actual Q1-21 EPS = US$0.07
Actual Q2-21 EPS = US$0.13
Actual H1-21 EPS = US$0.20
So Largo needs to realise US$0.44 (US$0.64 - US$0.20) of EPS in H2 to meet the analyst annual EPS consensus of US$0.64.
Considering the fact that Largo booked only US$0.20 EPS out a total H1 sales revenue of US$94.1M, can the company realise an EPS of US$0.44 in H2 if the estimated H2 sales revenue = US$107.1M as per the back-of-the-envelope scenario calculated above?
Conclusion: Imho, it is difficult to meet the analyst annual EPS consensus without being able to achieve better profit margins (i.e better cost efficiency than in H1), a tax recovery and/or an FX gain.