It's been a sad week for Resolute Forest Products Inc. (NYSE:RFP), who've watched their investment drop 13% to US$3.49 in the week since the company reported its annual result. Revenues of US$2.9b arrived in line with expectations, although statutory losses per share were US$0.51, an impressive 122% smaller than what broker models predicted. 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, the most recent consensus for Resolute Forest Products from three analysts is for revenues of US$3.01b in 2020, which is a reasonable 2.9% increase on its sales over the past 12 months. The statutory loss per share is expected to greatly reduce in the near future, narrowing 21% to US$0.62. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.16b and earnings per share (EPS) of US$0.60 in 2020. Analysts have made an abrupt about-face on Resolute Forest Products, administering a a small dip in to revenue forecasts and slashing earnings forecasts from profit to loss.
There was no major change to the consensus price target of US$4.50, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Resolute Forest Products at US$5.00 per share, while the most bearish prices it at US$4.00. 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.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Resolute Forest Products's performance in recent years. For example, we noticed that Resolute Forest Products's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 2.9%, well above its historical decline of 3.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 2.3% per year. So while Resolute Forest Products's revenues are expected to improve, it seems that analysts are expecting it to grow at about the same rate as the overall market.
The Bottom Line
The most important thing to take away is that analysts are expecting Resolute Forest Products to become unprofitable next year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. The consensus price target held steady at US$4.50, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Resolute Forest Products going out to 2021, and you can see them free on our platform here.
You can also see whether Resolute Forest Products is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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