The annual results for Axalta Coating Systems Ltd. (NYSE:AXTA) were released last week, making it a good time to revisit its performance. It was not a great result overall. While revenues of US$4.5b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 16% to hit US$1.06 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. 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, Axalta Coating Systems's 14 analysts are forecasting 2020 revenues to be US$4.48b, approximately in line with the last 12 months. Statutory earnings per share are expected to jump 60% to US$1.70. In the lead-up to this report, analysts had been modelling revenues of US$4.57b and earnings per share (EPS) of US$1.74 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.
The consensus price target held steady at US$33.41, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Axalta Coating Systems at US$38.00 per share, while the most bearish prices it at US$29.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Further, we can compare these estimates to past performance, and see how Axalta Coating Systems forecasts compare to the wider market's forecast performance. We would highlight that sales are expected to reverse, with the forecast 0.02% revenue decline a notable change from historical growth of 2.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Axalta Coating Systems to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Axalta Coating Systems's revenues are expected to perform worse than the wider market. 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Axalta Coating Systems going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Axalta Coating Systems's balance sheet, and whether we think Axalta Coating Systems is carrying too much debt, for free on our platform here.
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