There’s been a notable change in appetite for Howden Joinery Group Plc (LON:HWDN) shares in the week since its annual report, with the stock down 13% to UK£6.36. It was a credible result overall, with revenues of UK£1.6b and statutory earnings per share of UK£0.35 both in line with analyst estimates, showing that Howden Joinery Group is executing in line with expectations. 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. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Howden Joinery Group from ten analysts is for revenues of UK£1.68b in 2020, which is a satisfactory 6.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to rise 6.9% to UK£0.37. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£1.69b and earnings per share (EPS) of UK£0.37 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of UK£6.62, suggesting that the company has met expectations in its recent result. 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. There are some variant perceptions on Howden Joinery Group, with the most bullish analyst valuing it at UK£7.75 and the most bearish at UK£5.35 per share. This shows there is still quite a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
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. We can infer from the latest estimates that analysts are expecting a continuation of Howden Joinery Group’s historical trends, as next year’s forecast 6.1% revenue growth is roughly in line with 7.3% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 4.7% per year. So it’s pretty clear that Howden Joinery Group is forecast to grow substantially faster than its market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – and our data does suggest that Howden Joinery Group’s revenues are expected to grow faster than the wider market. The consensus price target held steady at UK£6.62, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Howden Joinery Group going out to 2022, and you can see them free on our platform here.
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