Need To Know: The Consensus Just Cut Its Altra Industrial Motion Corp. (NASDAQ:AIMC) Estimates For 2020
Today is shaping up negative for Altra Industrial Motion Corp. (NASDAQ:AIMC) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Bidders are definitely seeing a different story, with the stock price of US$18.95 reflecting a 21% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the downgrade, the consensus from three analysts covering Altra Industrial Motion is for revenues of US$1.6b in 2020, implying a not inconsiderable 15% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to plummet 22% to US$1.54 in the same period. Previously, the analysts had been modelling revenues of US$1.7b and earnings per share (EPS) of US$1.64 in 2020. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.
Check out our latest analysis for Altra Industrial Motion
It'll come as no surprise then, to learn that the analysts have cut their price target 12% to US$32.00. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Altra Industrial Motion analyst has a price target of US$51.00 per share, while the most pessimistic values it at US$19.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 15%, a significant reduction from annual growth of 19% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 0.7% next year. It's pretty clear that Altra Industrial Motion's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Altra Industrial Motion going forwards.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Altra Industrial Motion's business, like major dilution from new stock issuance in the past year. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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