Yahoo Finance Analysts Have Been Trimming Their Ferguson plc (LON:FERG) Price Target After Its Latest Report
It's been a sad week for Ferguson plc (LON:FERG), who've watched their investment drop 18% to UK£45.20 in the week since the company reported its interim result. It was a credible result overall, with revenues of US$11b and statutory earnings per share of US$4.78 both in line with analyst estimates, showing that Ferguson is executing in line with 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for Ferguson
Taking into account the latest results, Ferguson's 23 analysts currently expect revenues in 2020 to be US$22.4b, approximately in line with the last 12 months. Per-share earnings are expected to increase 9.2% to US$4.73. In the lead-up to this report, the analysts had been modelling revenues of US$22.4b and earnings per share (EPS) of US$4.84 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target fell 7.0% to US$85.63, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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. There are some variant perceptions on Ferguson, with the most bullish analyst valuing it at US$113 and the most bearish at US$61.74 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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 Ferguson's revenue growth is expected to slow, with forecast 1.0% increase next year well below the historical 3.7%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.0% next year. Factoring in the forecast slowdown in growth, it seems obvious that Ferguson is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Ferguson. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Ferguson going out to 2024, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Ferguson , and understanding them should be part of your investment process.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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