Earnings Update: Here's Why Analysts Just Lifted Their Construction Partners, Inc. Price Target To US$20.00
There's been a notable change in appetite for Construction Partners, Inc. (NASDAQ:ROAD) shares in the week since its annual report, with the stock down 11% to US$17.11. Construction Partners reported in line with analyst predictions, delivering revenues of US$783m and earnings per share of US$0.84, suggesting the business is executing well and in line with its plan. 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. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on Construction Partners after the latest results.
View our latest analysis for Construction Partners
Following the latest results, Construction Partners's five analysts are now forecasting revenues of US$852.8m in 2020. This would be a notable 8.9% improvement in sales compared to the last 12 months. Earnings per share are expected to dip 3.0% to US$0.81 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$854.5m and earnings per share (EPS) of US$0.98 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
Despite cutting their earnings forecasts, analysts have lifted their price target 19% to US$20.00, suggesting that these impacts are not expected to weigh on the stock's value in the long term. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Construction Partners at US$21.50 per share, while the most bearish prices it at US$18.50. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Further, we can compare these estimates to past performance, and see how Construction Partners forecasts compare to the wider market's forecast performance. We would highlight that Construction Partners's revenue growth is expected to slow, with forecast 8.9% increase next year well below the historical 13%p.a. growth over the last three years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.8% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkConstruction Partners will grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Construction Partners. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Construction Partners analysts - going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Construction Partners Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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