The analysts covering Albany International Corp. (NYSE:AIN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the current consensus, from the four analysts covering Albany International, is for revenues of US$805m in 2021, which would reflect a not inconsiderable 11% reduction in Albany International's sales over the past 12 months. Statutory earnings per share are anticipated to decline 11% to US$2.72 in the same period. Before this latest update, the analysts had been forecasting revenues of US$897m and earnings per share (EPS) of US$3.13 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
What's most unexpected is that the consensus price target rose 5.0% to US$71.00, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. 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. Currently, the most bullish analyst values Albany International at US$84.00 per share, while the most bearish prices it at US$63.00. This is a very narrow spread of estimates, implying either that Albany International is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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 forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 11% revenue decline a notable change from historical growth of 7.3% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.8% next year. It's pretty clear that Albany International's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Albany International. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Albany International.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on Albany International's mountain of debt, which could lead to some belt tightening for shareholders. You can learn more about our debt analysis for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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