Why did CSAN's Q4 2023 EPS forecast raise eyebrows?

The Cosan S.A. (BVMF:CSAN3) Q4 2023 EPS (Earnings Per Share) forecast has raised eyebrows due to several factors that suggest a potential mismatch between the market's expectations and the company's underlying financial performance. Here are the key reasons:

1. Earnings Growth Rate: The market appeared to be expecting a higher earnings growth rate than what was actually projected. Cosan's EPS growth rate over the past five years has been relatively modest, with a compound growth rate of 0.5% per year. However, the market's expectations might have been influenced by the company's historical performance and the broader economic conditions, leading to a potential disconnect between forecasted and actual EPS growth.
2. Recent Performance: Cosan's recent financial results have shown improvements in revenue and net income, but the EPS growth has been slower than the share price growth. This discrepancy could have led to concerns about the sustainability of earnings and whether the current share price is justified by the underlying financial performance.
3. Market Sentiment: The market's sentiment towards Cosan has been influenced by broader industry trends and global economic conditions. The Oil and Gas industry in Brazil is expected to remain flat, which might have impacted investor confidence in Cosan's future earnings potential. Additionally, global commodity prices and currency fluctuations can significantly affect Cosan's revenue and profitability, adding further uncertainty to the EPS forecast.
4. Return on Capital Employed (ROCE): Cosan's ROCE has been declining over the past five years, from 8.5% to 6.3%. This trend could have raised eyebrows among investors who prefer companies with increasing ROCE, as it indicates a potential decline in the company's profitability and cash generation capacity.
5. Dividend and Shareholder Returns: While Cosan has a history of generating profits, the company's dividend policy and total shareholder returns (TSR) might not have met market expectations. The TSR takes into account the value of cash dividends and capital raisings, which are crucial for shareholder returns. If the market perceived that Cosan was not generating sufficient returns for shareholders through dividends and capital appreciation, this could have led to concerns about the company's ability to deliver on shareholder value.

In conclusion, the Q4 2023 EPS forecast for Cosan has raised eyebrows due to a combination of factors including a perceived mismatch between earnings growth and share price expectations, concerns over the sustainability of earnings, market sentiment influenced by broader industry trends, a declining ROCE trend, and potential uncertainties around dividend policy and shareholder returns.