Investors in Kaufman & Broad S.A. (EPA:KOF) had a good week, as its shares rose 2.0% to close at €38.26 following the release of its full-year results. It was a credible result overall, with revenues of €1.5b and statutory earnings per share of €3.45 both in line with analyst estimates, showing that Kaufman & Broad is executing in line with expectations. 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. 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, Kaufman & Broad's seven analysts currently expect revenues in 2020 to be €1.49b, approximately in line with the last 12 months. Statutory earnings per share are expected to shrink 7.8% to €3.31 in the same period. Before this earnings report, analysts had been forecasting revenues of €1.52b and earnings per share (EPS) of €3.30 in 2020. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average price target was steady at €44.26 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Kaufman & Broad at €51.00 per share, while the most bearish prices it at €39.00. 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. We would highlight that Kaufman & Broad's revenue growth is expected to slow, with forecast 1.1% increase next year well below the historical 8.4%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 5.0% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Kaufman & Broad to grow slower than the wider 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. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the long-term value of the business. The consensus price target held steady at €44.26, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Kaufman & Broad going out to 2023, and you can see them free on our platform here..
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