There's been a notable change in appetite for Installed Building Products, Inc. (NYSE:IBP) shares in the week since its yearly report, with the stock down 17% to US$66.05. Results were roughly in line with estimates, with revenues of US$1.5b and statutory earnings per share of US$2.28. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the latest consensus from Installed Building Products's nine analysts is for revenues of US$1.69b in 2020, which would reflect a meaningful 12% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to leap 36% to US$3.12. Before this earnings report, analysts had been forecasting revenues of US$1.65b and earnings per share (EPS) of US$2.98 in 2020. So there seems to have been a moderate uplift in analyst sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
Despite these upgrades, analysts have not made any major changes to their price target of US$77.56, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Installed Building Products at US$87.00 per share, while the most bearish prices it at US$71.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Installed Building Products's past performance and to peers in the same market. It's pretty clear that analysts expect Installed Building Products's revenue growth will slow down substantially, with revenues next year expected to grow 12%, compared to a historical growth rate of 21% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.5% next year. So it's pretty clear that, while Installed Building Products's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Installed Building Products's earnings potential next year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues 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 estimates - from multiple Installed Building Products analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Installed Building Products is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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