Graphic Packaging Holding Company (NYSE:GPK) 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. The result was positive overall - although revenues of US$1.6b were in line with what the analysts predicted, Graphic Packaging Holding surprised by delivering a statutory profit of US$0.19 per share, modestly greater than expected. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following last week's earnings report, Graphic Packaging Holding's twelve analysts are forecasting 2020 revenues to be US$6.41b, approximately in line with the last 12 months. Per-share earnings are expected to surge 44% to US$0.62. Before this earnings report, the analysts had been forecasting revenues of US$6.35b and earnings per share (EPS) of US$0.59 in 2020. So the consensus seems to have become somewhat more optimistic on Graphic Packaging Holding's earnings potential following these results.
There's been no major changes to the consensus price target of US$16.97, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Graphic Packaging Holding analyst has a price target of US$19.00 per share, while the most pessimistic values it at US$15.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Graphic Packaging Holding's past performance and to peers in the same industry. We would highlight that Graphic Packaging Holding's revenue growth is expected to slow, with forecast 1.5% increase next year well below the historical 11%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.5% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Graphic Packaging Holding.
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 Graphic Packaging Holding following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. 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 Graphic Packaging Holding. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Graphic Packaging Holding going out to 2022, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 5 warning signs for Graphic Packaging Holding you should know about.
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.
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