Sally Beauty Holdings, Inc. Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models
It's been a sad week for Sally Beauty Holdings, Inc. (NYSE:SBH), who've watched their investment drop 15% to US$13.20 in the week since the company reported its quarterly result. It was not a great result overall. While revenues of US$980m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 20% to hit US$0.45 per share. 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 gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
See our latest analysis for Sally Beauty Holdings
Following last week's earnings report, Sally Beauty Holdings's nine analysts are forecasting 2020 revenues to be US$3.90b, approximately in line with the last 12 months. Statutory per-share earnings are expected to be US$2.20, roughly flat on the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.92b and earnings per share (EPS) of US$2.33 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.
The average analyst price target fell 14% to US$15.50, with reduced earnings forecasts clearly tied to a lower valuation estimate. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sally Beauty Holdings, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$14.00 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Analysts are definitely expecting Sally Beauty Holdings's growth to accelerate, with the forecast 1.0% growth ranking favourably alongside historical growth of 0.4% per annum 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 5.7% per year. So it's clear that despite the acceleration in growth, Sally Beauty Holdings is expected to grow meaningfully slower than the market average.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sally Beauty Holdings. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Sally Beauty Holdings analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Sally Beauty Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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