Eagle Materials Inc. (NYSE:EXP) defied analyst predictions to release its annual results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 3.1% to hit US$1.5b. Eagle Materials also reported a statutory profit of US$1.68, which was an impressive 125% above what the analysts had forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, Eagle Materials' 13 analysts currently expect revenues in 2021 to be US$1.44b, approximately in line with the last 12 months. Statutory earnings per share are predicted to surge 194% to US$4.96. In the lead-up to this report, the analysts had been modelling revenues of US$1.40b and earnings per share (EPS) of US$4.38 in 2021. So it seems there's been a definite increase in optimism about Eagle Materials' future following the latest results, with a nice gain to the earnings per share forecasts in particular.
It will come as no surprise to learn that the analysts have increased their price target for Eagle Materials 5.8% to US$76.33 on the back of these upgrades. 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 Eagle Materials, with the most bullish analyst valuing it at US$100.00 and the most bearish at US$60.00 per share. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 1.1% revenue decline a notable change from historical growth of 6.4% 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 4.9% next year. It's pretty clear that Eagle Materials' 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 Eagle Materials following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower 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 in mind, we wouldn't be too quick to come to a conclusion on Eagle Materials. Long-term earnings power is much more important than next year's profits. We have forecasts for Eagle Materials going out to 2025, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 3 warning signs for Eagle Materials you should be aware of.
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