It’s been a good week for Ralph Lauren Corporation (NYSE:RL) shareholders, because the company has just released its latest third-quarter results, and the shares gained 7.0% to US$121. Revenues were US$1.8b, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$4.41, an impressive 80% ahead of estimates. 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 statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the current consensus from Ralph Lauren’s 18 analysts is for revenues of US$6.56b in 2021, which would reflect a modest 2.6% increase on its sales over the past 12 months. Statutory per-share earnings are expected to be US$8.70, roughly flat on the last 12 months. In the lead-up to this report, analysts had been modelling revenues of US$6.54b and earnings per share (EPS) of US$8.39 in 2021. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 7.9% to US$135, suggesting that higher earnings estimates flow through to the stock’s valuation as well. 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 Ralph Lauren, with the most bullish analyst valuing it at US$170 and the most bearish at US$117 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Further, we can compare these estimates to past performance, and see how Ralph Lauren forecasts compare to the wider market’s forecast performance. For example, we noticed that Ralph Lauren’s rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 2.6%, well above its historical decline of 4.8% a year 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 revenue grow 7.1% per year. Although Ralph Lauren’s revenues are expected to improve, it seems that analysts are still bearish on the business, forecasting it to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Ralph Lauren’s earnings potential next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Ralph Lauren’s revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
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 Ralph Lauren going out to 2024, and you can see them free on our platform here..
We also provide an overview of the Ralph Lauren Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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