Bearish: Analysts Just Cut Their Tri Pointe Homes, Inc. (NYSE:TPH) Revenue and EPS estimates

Market forces rained on the parade of Tri Pointe Homes, Inc. (NYSE:TPH) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At US$16.76, shares are up 7.3% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, the current consensus, from the six analysts covering Tri Pointe Homes, is for revenues of US$3.3b in 2023, which would reflect a chunky 19% reduction in Tri Pointe Homes' sales over the past 12 months. Statutory earnings per share are anticipated to tumble 36% to US$3.28 in the same period. Previously, the analysts had been modelling revenues of US$3.9b and earnings per share (EPS) of US$4.22 in 2023. Indeed, we can see that the analysts are a lot more bearish about Tri Pointe Homes' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

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Analysts made no major changes to their price target of US$22.00, suggesting the downgrades are not expected to have a long-term impact on Tri Pointe Homes' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Tri Pointe Homes at US$26.00 per share, while the most bearish prices it at US$17.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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 a forecast 15% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 7.3% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 0.4% per year. So it's pretty clear that Tri Pointe Homes' revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately they also cut their revenue estimates for next year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of Tri Pointe Homes.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Tri Pointe Homes 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 downgrading 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.