Shorn Like A Sheep: Analysts Just Shaved Their Simpson Manufacturing Co., Inc. (NYSE:SSD) Forecasts Dramatically
The analysts covering Simpson Manufacturing Co., Inc. (NYSE:SSD) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Simpson Manufacturing's four analysts is for revenues of US$1.0b in 2020, which would reflect a considerable 9.3% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to tumble 41% to US$1.78 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.2b and earnings per share (EPS) of US$2.87 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
Check out our latest analysis for Simpson Manufacturing
The consensus price target fell 16% to US$62.50, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Simpson Manufacturing at US$82.00 per share, while the most bearish prices it at US$52.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 9.3% revenue decline a notable change from historical growth of 9.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.6% annually for the foreseeable future. It's pretty clear that Simpson Manufacturing's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Simpson Manufacturing.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Simpson Manufacturing going out to 2021, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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