There's been a notable change in appetite for Beacon Roofing Supply, Inc. (NASDAQ:BECN) shares in the week since its yearly report, with the stock down 13% to US$30.15. It looks like the results were pretty good overall. While revenues of US$7.1b were in line with analyst predictions, losses were much smaller than expected, with Beacon Roofing Supply losing US$0.51 per share. 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. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on Beacon Roofing Supply after the latest results.
Taking into account the latest results, the most recent consensus for Beacon Roofing Supply from 13 analysts is for revenues of US$7.29b in 2020, which is a satisfactory 2.6% increase on its sales over the past 12 months. Earnings are expected to improve, with Beacon Roofing Supply forecast to report a profit of US$0.81 per share. Before this earnings report, analysts had been forecasting revenues of US$7.38b and earnings per share (EPS) of US$1.04 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
The consensus price target held steady at US$32.89, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Beacon Roofing Supply at US$39.00 per share, while the most bearish prices it at US$29.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Beacon Roofing Supply's past performance and to peers in the same market. It's pretty clear that analysts expect Beacon Roofing Supply's revenue growth will slow down substantially, with revenues next year expected to grow 2.6%, compared to a historical growth rate of 24% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 4.4% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Beacon Roofing Supply.
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. 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$32.89, 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 estimates - from multiple Beacon Roofing Supply analysts - going out to 2023, and you can see them free on our platform here.
It might also be worth considering whether Beacon Roofing Supply's debt load is appropriate, using our debt analysis tools on the Simply Wall St 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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