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Last week, you might have seen that Hostess Brands, Inc. (NASDAQ:TWNK) released its annual result to the market. The early response was not positive, with shares down 3.8% to US$12.61 in the past week. The result was positive overall - although revenues of US$908m were in line with what analysts predicted, Hostess Brands surprised by delivering a statutory profit of US$0.55 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Hostess Brands's nine analysts are now forecasting revenues of US$991.0m in 2020. This would be a meaningful 9.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to step up 16% to US$0.66. In the lead-up to this report, analysts had been modelling revenues of US$1.01b and earnings per share (EPS) of US$0.67 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Analysts reconfirmed their price target of US$16.36, showing that the business is executing well and in line with expectations. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Hostess Brands, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$14.00 per share. 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Analysts are definitely expecting Hostess Brands's growth to accelerate, with the forecast 9.2% growth ranking favourably alongside historical growth of 6.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Hostess Brands is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Hostess Brands going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Hostess Brands's balance sheet, and whether we think Hostess Brands is carrying too much debt, for free 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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