Bullish: Analysts Just Made A Decent Upgrade To Their Russel Metals Inc. (TSE:RUS) Forecasts

Russel Metals Inc. (TSE:RUS) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance.

Following this upgrade, Russel Metals' seven analysts are forecasting 2022 revenues to be CA$4.7b, approximately in line with the last 12 months. Statutory earnings per share are supposed to crater 37% to CA$4.49 in the same period. Previously, the analysts had been modelling revenues of CA$4.2b and earnings per share (EPS) of CA$3.97 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

See our latest analysis for Russel Metals

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of CA$41.36, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Russel Metals at CA$45.00 per share, while the most bearish prices it at CA$36.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

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. It's pretty clear that there is an expectation that Russel Metals' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 1.3% growth on an annualised basis. This is compared to a historical growth rate of 2.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.2% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Russel Metals.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Russel Metals could be a good candidate for more research.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Russel Metals analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.