Analysts might have been a bit too bullish on American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), given that the company fell short of expectations when it released its quarterly results last week. It was a pretty negative result overall, with revenues of US$1.7b missing analyst predictions by 2.1%. Worse, the business reported a loss of US$1.10 per share, a substantial decline on analyst expectations of a profit. 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. With this in mind, we’ve gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the seven analysts covering American Axle & Manufacturing Holdings provided consensus estimates of US$6.2b revenue in 2020, which would reflect an uncomfortable 8.4% decline on its sales over the past 12 months. Earnings are expected to improve, with American Axle & Manufacturing Holdings forecast to report a profit of US$2.06 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$6.1b and earnings per share (EPS) of US$2.14 in 2020. Overall it looks as though analysts were a bit mixed on the latest results. Although there was a to revenue, the consensus also made a minor downgrade to to its earnings per share forecasts.
The consensus price target was unchanged at US$13.09, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic American Axle & Manufacturing Holdings analyst has a price target of US$17.00 per share, while the most pessimistic values it at US$10.00. 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.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 8.4% a significant reduction from annual growth of 17% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 5.2% annually for the foreseeable future. It’s pretty clear that American Axle & Manufacturing Holdings’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for American Axle & Manufacturing Holdings. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for American Axle & Manufacturing Holdings going out to 2022, and you can see them free on our platform here..
You can also view our analysis of American Axle & Manufacturing Holdings’s balance sheet, and whether we think American Axle & Manufacturing Holdings is carrying too much debt, for free on our platform here.
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