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One thing we could say about the analysts on The Greenbrier Companies, Inc. (NYSE:GBX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of US$18.59 reflecting a 42% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
After the downgrade, the consensus from Greenbrier Companies' five analysts is for revenues of US$2.7b in 2020, which would reflect a chunky 16% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to dive 62% to US$0.84 in the same period. Previously, the analysts had been modelling revenues of US$3.5b and earnings per share (EPS) of US$2.40 in 2020. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.
The consensus price target fell 21% to US$25.17, with the weaker earnings outlook clearly leading analyst valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Greenbrier Companies at US$38.00 per share, while the most bearish prices it at US$17.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Greenbrier Companies' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 16% revenue decline a notable change from historical growth of 2.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 0.6% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Greenbrier Companies is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Greenbrier Companies. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Greenbrier Companies' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Greenbrier Companies.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Greenbrier Companies' financials, such as its declining profit margins. For more information, you can click here to discover this and the 3 other risks we've identified.
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.
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