It's been a sad week for Encore Wire Corporation (NASDAQ:WIRE), who've watched their investment drop 10% to US$51.94 in the week since the company reported its full-year result. Revenues were in line with forecasts, at US$1.3b, although statutory earnings per share came in 10% below what analysts expected, at US$2.77 per share. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Encore Wire's two analysts is for revenues of US$1.32b in 2020, which would reflect a satisfactory 3.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to ascend 20% to US$3.33. Before this earnings report, analysts had been forecasting revenues of US$1.33b and earnings per share (EPS) of US$3.64 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at US$63.00, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that Encore Wire's revenue growth is expected to slow, with forecast 3.6% increase next year well below the historical 5.2%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 2.9% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkEncore Wire will grow faster than the wider market.
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. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster 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 in mind, we wouldn't be too quick to come to a conclusion on Encore Wire. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.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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