Shareholders might have noticed that Bodycote plc (LON:BOY) filed its half-year result this time last week. The early response was not positive, with shares down 6.3% to UK£5.89 in the past week. It was a workmanlike result, with revenues of UK£307m coming in 5.6% ahead of expectations, and statutory earnings per share of UK£0.49, in line with analyst appraisals. This is an important time for investors, as they can track a company's performance in its report, look at what experts 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 estimates suggest is in store for next year.
After the latest results, the consensus from Bodycote's 15 analysts is for revenues of UK£622.0m in 2020, which would reflect a discernible 5.7% decline in sales compared to the last year of performance. Statutory earnings per share are expected to sink 16% to UK£0.20 in the same period. Before this earnings report, the analysts had been forecasting revenues of UK£617.8m and earnings per share (EPS) of UK£0.20 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at UK£6.49, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. There are some variant perceptions on Bodycote, with the most bullish analyst valuing it at UK£8.20 and the most bearish at UK£5.20 per share. This shows there is still 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 5.7% revenue decline a notable change from historical growth of 5.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.4% next year. It's pretty clear that Bodycote's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Bodycote. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Bodycote. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Bodycote analysts - going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Bodycote that you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.