Rexnord Corporation (NYSE:RXN) Just Reported And Analysts Have Been Lifting Their Price Targets
Shareholders of Rexnord Corporation (NYSE:RXN) will be pleased this week, given that the stock price is up 15% to US$47.10 following its latest annual results. Rexnord reported in line with analyst predictions, delivering revenues of US$2.0b and statutory earnings per share of US$1.19, suggesting the business is executing well and in line with its plan. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for Rexnord
After the latest results, the six analysts covering Rexnord are now predicting revenues of US$2.10b in 2021. If met, this would reflect a reasonable 6.2% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 39% to US$1.68. Before this earnings report, the analysts had been forecasting revenues of US$2.07b and earnings per share (EPS) of US$1.70 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The consensus price target rose 12% to US$50.57despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Rexnord's earnings by assigning a price premium. 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. The most optimistic Rexnord analyst has a price target of US$53.00 per share, while the most pessimistic values it at US$41.00. This is a very narrow spread of estimates, implying either that Rexnord is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Rexnord's rate of growth is expected to accelerate meaningfully, with the forecast 6.2% revenue growth noticeably faster than its historical growth of 1.9%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.7% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Rexnord is expected to grow slower than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Rexnord's revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Rexnord going out to 2023, and you can see them free on our platform here.
Even so, be aware that Rexnord is showing 1 warning sign in our investment analysis , you should know about...
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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