It's been a mediocre week for Valmont Industries, Inc. (NYSE:VMI) shareholders, with the stock dropping 12% to US$134 in the week since its latest yearly results. It looks like the results were a bit of a negative overall. While revenues of US$2.8b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 2.3% to hit US$7.06 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Valmont Industries after the latest results.
Taking into account the latest results, the latest consensus from Valmont Industries's four analysts is for revenues of US$2.91b in 2020, which would reflect a modest 5.1% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to increase 6.1% to US$7.53. In the lead-up to this report, analysts had been modelling revenues of US$2.95b and earnings per share (EPS) of US$8.68 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target fell 7.2% to US$149, with analysts clearly linking lower forecast earnings to the performance of the stock price. 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 Valmont Industries at US$168 per share, while the most bearish prices it at US$145. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. For example, we noticed that Valmont Industries's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 5.1%, well above its historical decline of 0.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue grow 3.6% per year. So it looks like Valmont Industries is expected to grow faster than its competitors, at least for a while.
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 Valmont Industries. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Valmont Industries's revenues are expected to grow faster 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Valmont Industries going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Valmont Industries's balance sheet, and whether we think Valmont Industries is carrying too much debt, for free on our platform here.
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