It's been a good week for Matthews International Corporation (NASDAQ:MATW) shareholders, because the company has just released its latest yearly results, and the shares gained 6.3% to US$36.89. Sales hit US$1.5b in line with forecasts, although the company reported a loss per share of US$1.21 that was somewhat smaller than analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, Matthews International's three analysts currently expect revenues in 2020 to be US$1.55b, approximately in line with the last 12 months. Earnings are expected to improve, with Matthews International forecast to report a profit of US$2.90 per share. Before this earnings report, analysts had been forecasting revenues of US$1.54b and earnings per share (EPS) of US$3.16 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at US$57.00, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on Matthews International, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$49.00 per share. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Matthews International's past performance and to peers in the same market. It's pretty clear that analysts expect Matthews International's revenue growth will slow down substantially, with revenues next year expected to grow 0.7%, compared to a historical growth rate of 4.7% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Matthews International to grow slower than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Matthews International. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$57.00, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Matthews International. Long-term earnings power is much more important than next year's profits. We have forecasts for Matthews International going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Matthews International's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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