ACCO Brands Corporation (NYSE:ACCO) shares fell 7.4% to US$8.01 in the week since its latest annual results. The result was positive overall - although revenues of US$2.0b were in line with what analysts predicted, ACCO Brands surprised by delivering a statutory profit of US$1.06 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what top 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 analysts have changed their earnings models, following these results.
Following last week's earnings report, ACCO Brands's six analysts are forecasting 2020 revenues to be US$1.96b, approximately in line with the last 12 months. Statutory earnings per share are expected to swell 16% to US$1.24. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.96b and earnings per share (EPS) of US$1.31 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$13.00, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values ACCO Brands at US$14.00 per share, while the most bearish prices it at US$10.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await ACCO Brands shareholders.
Further, we can compare these estimates to past performance, and see how ACCO Brands forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect ACCO Brands's revenue growth will slow down substantially, with revenues next year expected to grow 0.1%, compared to a historical growth rate of 5.9% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.2% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect ACCO Brands to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for ACCO Brands. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$13.00, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on ACCO Brands. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple ACCO Brands analysts - going out to 2021, and you can see them free on our platform here.
You can also see whether ACCO Brands is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.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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