Here's What Analysts Are Forecasting For Stella-Jones Inc. After Its Latest Third-Quarter Results

It's been a good week for Stella-Jones Inc. (TSE:SJ) shareholders, because the company has just released its latest third-quarter results, and the shares gained 6.1% to CA$38.95. Results look mixed - while revenue fell marginally short of analyst estimates at CA$627m, earnings were in line with expectations, at CA$0.78 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. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.

Check out our latest analysis for Stella-Jones

Following the latest results, Stella-Jones's eight analysts are now forecasting revenues of CA$2.3b in 2020. This would be a modest 4.9% improvement in sales compared to the last 12 months. Earnings per share are expected to swell 16% to CA$2.62. Yet prior to the latest earnings, analysts had been forecasting revenues of CA$2.3b and earnings per share (EPS) of CA$2.67 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.

The consensus price target held steady at CA$48.31, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. The most optimistic Stella-Jones analyst has a price target of CA$52.00 per share, while the most pessimistic values it at CA$43.50. 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 we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether analysts are more or less bullish relative to other companies in the market. We would highlight that Stella-Jones's revenue growth is expected to slow, with forecast 4.9% increase next year well below the historical 11%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 7.2% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts also expect the wider market to grow faster than Stella-Jones.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues expected to perform worse 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 Stella-Jones going out to 2021, and you can see them free on our platform here..

You can also see whether Stella-Jones is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.