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Earnings Update: Here's Why Analysts Just Lifted Their Fletcher Building Limited (NZSE:FBU) Price Target To NZ$6.72

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·3 min read
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Fletcher Building Limited (NZSE:FBU) last week reported its latest interim results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Fletcher Building

earnings-and-revenue-growth
earnings-and-revenue-growth

Following the latest results, Fletcher Building's eleven analysts are now forecasting revenues of NZ$7.81b in 2021. This would be a reasonable 6.5% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Fletcher Building forecast to report a statutory profit of NZ$0.36 per share. In the lead-up to this report, the analysts had been modelling revenues of NZ$7.66b and earnings per share (EPS) of NZ$0.35 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target rose 12% to NZ$6.72, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. There are some variant perceptions on Fletcher Building, with the most bullish analyst valuing it at NZ$8.10 and the most bearish at NZ$4.80 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Fletcher Building is forecast to grow faster in the future than it has in the past, with revenues expected to grow 6.5%. If achieved, this would be a much better result than the 4.5% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 6.4% next year. So while Fletcher Building's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Fletcher Building's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Fletcher Building going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 1 warning sign we've spotted with Fletcher Building .

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 editorial-team (at) simplywallst.com.