Quanex Building Products Corporation (NYSE:NX) came out with its yearly results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Revenues of US$894m arrived in line with expectations, although losses per share were US$1.42, an impressive 1191% smaller than what broker models predicted. 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. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Following last week's earnings report, Quanex Building Products's three analysts are forecasting 2020 revenues to be US$878.6m, approximately in line with the last 12 months. Earnings are expected to improve, with Quanex Building Products forecast to report a profit of US$1.09 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$909.0m and earnings per share (EPS) of US$1.01 in 2020. So it's pretty clear that while sentiment around revenues has declined following the latest results, analysts are now more bullish on the company's earnings power.
The consensus has made no major changes to the price target of US$21.00, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 Quanex Building Products at US$22.00 per share, while the most bearish prices it at US$19.00. 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.7% a significant reduction from annual growth of 7.9% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Quanex Building Products to grow slower than the wider market.
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 Quanex Building Products's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Even so, earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$21.00, 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 Quanex Building Products. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Quanex Building Products analysts - going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Quanex Building Products's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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