Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) defied analyst predictions to release its full-year results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 8.5% to hit US$1.5b. Infrastructure and Energy Alternatives also reported a statutory profit of US$0.31, which was an impressive 55% above what analysts had forecast. 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' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the current consensus from Infrastructure and Energy Alternatives's one analyst is for revenues of US$1.55b in 2020, which would reflect a reasonable 6.2% increase on its sales over the past 12 months. Statutory losses are forecast to balloon 79% to US$0.20 per share. Before this earnings report, analysts had been forecasting revenues of US$1.50b and earnings per share (EPS) of US$0.23 in 2020. While they've upgraded their revenue forecasts for next year, the analyst consensus also expects losses to increase, perhaps due to the investments required to grow revenue. In any event, it's not clear that these new estimates are particularly bullish.
Spiting the revenue upgrading, the average analyst price target fell 57% to US$3.00, clearly signalling that higher forecast losses are a valuation concern.
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. We would highlight that Infrastructure and Energy Alternatives's revenue growth is expected to slow, with forecast 6.2% increase next year well below the historical 30%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 3.6% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkInfrastructure and Energy Alternatives will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts are expecting Infrastructure and Energy Alternatives to become unprofitable next year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Infrastructure and Energy Alternatives's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Infrastructure and Energy Alternatives. 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.
You can also view our analysis of Infrastructure and Energy Alternatives's balance sheet, and whether we think Infrastructure and Energy Alternatives is carrying too much debt, for free on our platform here.
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