As you might know, Wabtec Corporation (NYSE:WAB) recently reported its yearly numbers. It was not a great result overall. While revenues of US$8.2b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 13% to hit US$1.84 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Wabtec after the latest results.
Following the latest results, Wabtec's eleven analysts are now forecasting revenues of US$8.69b in 2020. This would be a modest 6.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to leap 103% to US$3.89. Yet prior to the latest earnings, analysts had been forecasting revenues of US$8.55b and earnings per share (EPS) of US$4.66 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
The consensus price target held steady at US$88.73, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on Wabtec, with the most bullish analyst valuing it at US$102 and the most bearish at US$74.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. It's pretty clear that analysts expect Wabtec's revenue growth will slow down substantially, with revenues next year expected to grow 6.0%, compared to a historical growth rate of 18% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.5% next year. So it's pretty clear that, while Wabtec's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
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 Wabtec. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Wabtec. Long-term earnings power is much more important than next year's profits. We have forecasts for Wabtec going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Wabtec'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 email@example.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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