Adairs Limited Just Missed Earnings - But Analysts Have Updated Their Models

It's been a mediocre week for Adairs Limited (ASX:ADH) shareholders, with the stock dropping 14% to AU$1.86 in the week since its latest annual results. It looks like the results were a bit of a negative overall. While revenues of AU$594m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 9.7% to hit AU$0.18 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Adairs

Following the latest results, Adairs' eight analysts are now forecasting revenues of AU$616.4m in 2025. This would be a satisfactory 3.7% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to expand 15% to AU$0.20. Before this earnings report, the analysts had been forecasting revenues of AU$628.9m and earnings per share (EPS) of AU$0.23 in 2025. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.

It might be a surprise to learn that the consensus price target fell 14% to AU$2.09, with the analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Adairs, with the most bullish analyst valuing it at AU$2.50 and the most bearish at AU$1.75 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Adairs shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Adairs' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 3.7% growth on an annualised basis. This is compared to a historical growth rate of 12% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.2% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Adairs.

The Bottom Line

The most important thing to take away is that the 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 forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Adairs' future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Adairs analysts - going out to 2027, and you can see them free on our platform here.

Even so, be aware that Adairs is showing 1 warning sign in our investment analysis , you should know about...

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.