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One thing we could say about the analysts on Alexander & Baldwin, Inc. (NYSE:ALEX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for Alexander & Baldwin from its two analysts is for revenues of US$334m in 2021 which, if met, would be a reasonable 7.2% increase on its sales over the past 12 months. Per-share earnings are expected to leap 199% to US$0.41. Previously, the analysts had been modelling revenues of US$371m and earnings per share (EPS) of US$0.48 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the US$21.67 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Alexander & Baldwin, with the most bullish analyst valuing it at US$24.00 and the most bearish at US$18.00 per share. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
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. The analysts are definitely expecting Alexander & Baldwin's growth to accelerate, with the forecast 9.7% annualised growth to the end of 2021 ranking favourably alongside historical growth of 0.4% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.4% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Alexander & Baldwin is expected to grow much faster than its industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Alexander & Baldwin. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Alexander & Baldwin.
Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Alexander & Baldwin that suggests the company could be somewhat overvalued. Find out why, and see how we estimate the valuation for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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