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It's been a mediocre week for American Woodmark Corporation (NASDAQ:AMWD) shareholders, with the stock dropping 19% to US$94.00 in the week since its latest quarterly results. Statutory earnings per share fell badly short of expectations, coming in at US$0.75, some 32% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$396m. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the latest consensus from American Woodmark's four analysts is for revenues of US$1.75b in 2021, which would reflect a satisfactory 5.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 36% to US$6.75. Before this earnings report, analysts had been forecasting revenues of US$1.77b and earnings per share (EPS) of US$6.92 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at US$109, with 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 American Woodmark analyst has a price target of US$116 per share, while the most pessimistic values it at US$100.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
In addition, we can look to American Woodmark's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that American Woodmark's revenue growth is expected to slow, with forecast 5.4% increase next year well below the historical 17%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.4% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting American Woodmark to grow at about the same rate as 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 American Woodmark. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at US$109, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for American Woodmark going out to 2022, and you can see them free on our platform here.
You can also view our analysis of American Woodmark's balance sheet, and whether we think American Woodmark is carrying too much debt, 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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