A week ago, Luxfer Holdings PLC (NYSE:LXFR) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 5.1% to hit US$90m. Luxfer Holdings also reported a statutory profit of US$0.15, which was an impressive 71% above what the analysts had forecast. Following the result, the 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 the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the four analysts covering Luxfer Holdings, is for revenues of US$373.5m in 2020, which would reflect a discernible 6.6% reduction in Luxfer Holdings' sales over the past 12 months. Statutory earnings per share are predicted to leap 26% to US$0.63. Before this earnings report, the analysts had been forecasting revenues of US$372.2m and earnings per share (EPS) of US$0.61 in 2020. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The average the analysts price target fell 9.0% to US$20.17, suggesting thatthe analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Luxfer Holdings, with the most bullish analyst valuing it at US$23.00 and the most bearish at US$18.50 per share. This is a very narrow spread of estimates, implying either that Luxfer Holdings is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Luxfer Holdings' past performance and to peers in the same industry. Over the past five years, revenues have declined around 0.2% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 6.6% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 7.5% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Luxfer Holdings to suffer worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Luxfer Holdings following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Luxfer Holdings' revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Luxfer Holdings' future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Luxfer Holdings analysts - going out to 2021, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Luxfer Holdings , and understanding these should be part of your investment process.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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