It's been a sad week for BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), who've watched their investment drop 12% to US$23.29 in the week since the company reported its quarterly result. Results look mixed - while revenue fell marginally short of analyst estimates at US$3.2b, earnings were in line with expectations, at US$0.40 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. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for BJ's Wholesale Club Holdings from 15 analysts is for revenues of US$13.6b in 2021, which is a satisfactory 3.9% increase on its sales over the past 12 months. Earnings per share are expected to accumulate 5.6% to US$1.62. Yet prior to the latest earnings, analysts had been forecasting revenues of US$13.8b and earnings per share (EPS) of US$1.65 in 2021. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target fell -5.5% to US$29.87, suggesting that analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the quarterly results. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic BJ's Wholesale Club Holdings analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$27.00. This shows there is still quite 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's clear from the latest estimates that BJ's Wholesale Club Holdings's rate of growth is expected to accelerate meaningfully, with forecast 3.9% revenue growth noticeably faster than its historical growth of 2.2%p.a. over the past three years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 4.0% per year. BJ's Wholesale Club Holdings is expected to grow at about the same rate as its market, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of BJ's Wholesale Club Holdings's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on BJ's Wholesale Club Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for BJ's Wholesale Club Holdings going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether BJ's Wholesale Club Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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