Capital Limited's Earnings Miss: What Analysts Are Forecasting Now

Capital Limited (LON:CAPD) shareholders are likely feeling a bit disappointed after the company's latest earnings report. The stock fell 2.6% to UK£0.60 in the week following the release, as earnings missed statutory estimates by 18%, hitting US$0.088 per share. While revenues of US$348m were in line with analyst predictions, the earnings miss has raised concerns about the company's future performance. Let's dive into what analysts are forecasting now and what it means for investors.

The recent earnings miss has led to a revision in analyst forecasts. The consensus from four analysts covering Capital is for revenues of US$308.8m in 2025, implying an 11% decline compared to the last 12 months. Statutory earnings per share (EPS) are forecast to drop 27% to US$0.065 in the same period. Prior to this report, analysts had been modeling revenues of US$305.3m and EPS of US$0.062 in 2025. The revised forecasts indicate a more bullish outlook on the business, as the new EPS estimates are higher than the previous ones. However, the consensus price target remains unchanged at UK£0.99, suggesting that the improved earnings outlook is not expected to have a long-term impact on value creation for shareholders.



The wide range of analyst price targets, from UK£0.60 to UK£1.60, reflects the varying perceptions and potential scenarios for the company's future performance. This volatility in stock price and analyst forecasts has likely contributed to a sense of uncertainty among investors, impacting overall sentiment.

So, what can Capital Limited do to mitigate the forecasted 11% revenue decline and 27% drop in earnings per share? Here are some strategic initiatives and operational changes the company can implement:

1. Leverage the Reko Diq Opportunity: Capital Limited has secured a Letter of Intent for a major mining contract at Reko Diq, which is expected to be among the top 10 copper projects globally. The company can accelerate investments to refurbish equipment for this project and start relocating equipment as soon as possible. This project has the potential to significantly boost revenue and earnings.

2. Improve Operational Efficiency: The company has made significant management changes to improve operational efficiency. Capital Limited can continue to focus on these changes and ensure that they are effectively implemented across all operations. This includes optimizing productivity and achieving better operational leverage.

3. Address Issues at MSALABS: MSALABS is expected to see a 30% revenue increase in 2025, with significant contributions from the Nevada Gold Mines laboratory. However, the company faced delays in reaching commercial utilization rates, affecting revenue and profitability. Capital Limited can work on addressing these delays and ensuring that MSALABS reaches its full potential.

4. Diversify Revenue Streams: Capital Limited can explore new opportunities to diversify its revenue streams. This could include expanding into new markets or industries, or developing new products or services. For example, the company could leverage its experience in the minerals industry to expand into other resource sectors.

5. Cost-Cutting Measures: The company can implement cost-cutting measures to mitigate the impact of the revenue decline on earnings. This could include reducing operational costs, streamlining processes, or negotiating better terms with suppliers.

6. Tax Optimization: Capital Limited faced a higher effective tax rate of 58% in 2024, affecting net profitability. The company can explore tax optimization strategies to reduce its tax burden and improve its bottom line.

In conclusion, while the recent earnings miss and revised analyst forecasts have raised concerns about Capital Limited's future performance, the company has several strategic initiatives and operational changes it can implement to mitigate the forecasted revenue decline and drop in earnings per share. Investors should keep a close eye on how the company executes these initiatives and whether they are able to turn things around in the coming quarters.