A week ago, Simpson Manufacturing Co., Inc. (NYSE:SSD) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. Statutory earnings performance was extremely strong, with revenue of US$326m beating expectations by 29% and earnings per share (EPS) of US$1.22, an impressive 138%ahead of expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Simpson Manufacturing after the latest results.
Taking into account the latest results, Simpson Manufacturing’s four analysts currently expect revenues in 2020 to be US$1.18b, approximately in line with the last 12 months. Statutory earnings per share are forecast to shrink 4.9% to US$3.48 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.05b and earnings per share (EPS) of US$2.47 in 2020. So we can see there’s been a pretty clear increase in sentiment following the latest results, with both revenues and earnings per share receiving a decent lift in the latest estimates.
With these upgrades, we’re not surprised to see that the analysts have lifted their price target 25% to US$93.75per share. 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. The most optimistic Simpson Manufacturing analyst has a price target of US$106 per share, while the most pessimistic values it at US$82.00. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 0.3% revenue decline a notable change from historical growth of 9.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.2% annually for the foreseeable future. It’s pretty clear that Simpson Manufacturing’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Simpson Manufacturing following these results. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Simpson Manufacturing going out to 2021, and you can see them free on our platform here..
Before you take the next step you should know about the 1 warning sign for Simpson Manufacturing that we have uncovered.
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