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Encore Wire Corporation Just Recorded A 87% EPS Beat: Here's What Analysts Are Forecasting Next

Simply Wall St
·3 mins read

Encore Wire Corporation (NASDAQ:WIRE) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Revenues were US$303m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.89, an impressive 87% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Encore Wire

NasdaqGS:WIRE Past and Future Earnings May 4th 2020
NasdaqGS:WIRE Past and Future Earnings May 4th 2020

Taking into account the latest results, the two analysts covering Encore Wire provided consensus estimates of US$1.14b revenue in 2020, which would reflect a chunky 10% decline on its sales over the past 12 months. Statutory per-share earnings are expected to be US$3.07, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$1.28b and earnings per share (EPS) of US$2.96 in 2020. Indeed we can see that the consensus opinion has undergone some fundamental changes after the latest results, with a real cut to revenues at the same time as boosting EPS forecasts.

There's been no real change to the average price target of US$56.50, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 10% revenue decline a notable change from historical growth of 5.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.8% annually for the foreseeable future. It's pretty clear that Encore Wire's revenues are expected to perform substantially 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 Encore Wire following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$56.50, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Encore Wire (1 is potentially serious!) that you need to be mindful of.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.