Advanced Drainage Systems, Inc. Just Missed EPS By 6.4%: Here's What Analysts Think Will Happen Next
Shareholders might have noticed that Advanced Drainage Systems, Inc. (NYSE:WMS) filed its second-quarter result this time last week. The early response was not positive, with shares down 3.1% to US$65.71 in the past week. Revenues of US$544m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.93, missing estimates by 6.4%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Check out our latest analysis for Advanced Drainage Systems
Taking into account the latest results, Advanced Drainage Systems' four analysts currently expect revenues in 2021 to be US$1.82b, approximately in line with the last 12 months. Statutory earnings per share are predicted to ascend 18% to US$2.49. In the lead-up to this report, the analysts had been modelling revenues of US$1.82b and earnings per share (EPS) of US$2.71 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
The consensus price target held steady at US$76.80, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. The most optimistic Advanced Drainage Systems analyst has a price target of US$97.00 per share, while the most pessimistic values it at US$53.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. We would highlight that Advanced Drainage Systems' revenue growth is expected to slow, with forecast 0.3% increase next year well below the historical 7.0%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.7% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Advanced Drainage Systems.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Advanced Drainage Systems' revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Advanced Drainage Systems. Long-term earnings power is much more important than next year's profits. We have forecasts for Advanced Drainage Systems going out to 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 4 warning signs for Advanced Drainage Systems you should know about.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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