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It's been a sad week for Edgewell Personal Care Company (NYSE:EPC), who've watched their investment drop 16% to US$31.44 in the week since the company reported its yearly result. Revenues came in at US$2.1b, in line with forecasts and the company reported a loss of US$6.52 per share, roughly in line with expectations. 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. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Following last week's earnings report, Edgewell Personal Care's nine analysts are forecasting 2020 revenues to be US$2.15b, approximately in line with the last 12 months. Earnings are expected to improve, with Edgewell Personal Care forecast to report a profit of US$2.97 per share. Before this earnings report, analysts had been forecasting revenues of US$2.12b and earnings per share (EPS) of US$3.46 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.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$35.64, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values Edgewell Personal Care at US$50.00 per share, while the most bearish prices it at US$26.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Further, we can compare these estimates to past performance, and see how Edgewell Personal Care forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Edgewell Personal Care's revenue growth will slow down substantially, with revenues next year expected to grow 0.4%, compared to a historical growth rate of 1.4% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 6.1% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Edgewell Personal Care.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Edgewell Personal Care going out to 2024, and you can see them free on our platform here.
You can also see whether Edgewell Personal Care is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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