A week ago, DXP Enterprises, Inc. (NASDAQ:DXPE) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 6.3% to hit US$301m. DXP Enterprises also reported a statutory profit of US$0.31, which was an impressive 88% above what the analysts had forecast. Following the result, the 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. 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 DXP Enterprises' three analysts is for revenues of US$1.11b in 2020, which would reflect a definite 12% decline in sales compared to the last year of performance. Statutory earnings per share are expected to dive 69% to US$0.60 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.11b and earnings per share (EPS) of US$0.50 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the solid gain to earnings per share expectations following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 8.6% to US$19.00. 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 DXP Enterprises analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$18.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One more thing stood out to us about these estimates, and it's the idea that DXP Enterprises'decline is expected to accelerate, with revenues forecast to fall 12% next year, topping off a historical decline of 0.8% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 5.0% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect DXP Enterprises to suffer worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards DXP Enterprises following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that DXP Enterprises' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple DXP Enterprises analysts - going out to 2021, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for DXP Enterprises (2 are significant!) that you need to take into consideration.
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