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Results: Welbilt, Inc. Confounded Analyst Expectations With A Surprise Profit

Simply Wall St
·4 min read

It's been a pretty great week for Welbilt, Inc. (NYSE:WBT) shareholders, with its shares surging 13% to US$6.85 in the week since its latest third-quarter results. It was overall a positive result, with revenues beating expectations by 9.9% to hit US$299m. Welbilt also reported a statutory profit of US$0.03, which was a nice improvement from the loss that the analysts were predicting. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Welbilt

earnings-and-revenue-growth
earnings-and-revenue-growth

After the latest results, the eight analysts covering Welbilt are now predicting revenues of US$1.25b in 2021. If met, this would reflect a credible 2.9% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Welbilt forecast to report a statutory profit of US$0.23 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.23b and earnings per share (EPS) of US$0.19 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The consensus price target was unchanged at US$8.72, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. The most optimistic Welbilt analyst has a price target of US$13.00 per share, while the most pessimistic values it at US$7.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Welbilt's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 2.9%, well above its historical decline of 0.7% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 7.2% next year. So although Welbilt's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Welbilt's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Welbilt. Long-term earnings power is much more important than next year's profits. We have forecasts for Welbilt going out to 2022, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for Welbilt that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.