Yahoo Finance Earnings Release: Here's Why Analysts Cut Their GMS Inc. (NYSE:GMS) Price Target To US$96.00
Shareholders might have noticed that GMS Inc. (NYSE:GMS) filed its annual result this time last week. The early response was not positive, with shares down 8.2% to US$81.82 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$5.5b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 4.0% to hit US$6.75 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
View our latest analysis for GMS
Taking into account the latest results, the current consensus from GMS' eight analysts is for revenues of US$5.84b in 2025. This would reflect an okay 6.1% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to increase 5.0% to US$7.31. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.85b and earnings per share (EPS) of US$7.48 in 2025. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
The average price target fell 6.1% to US$96.00, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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. The most optimistic GMS analyst has a price target of US$112 per share, while the most pessimistic values it at US$81.00. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that GMS' revenue growth is expected to slow, with the forecast 6.1% annualised growth rate until the end of 2025 being well below the historical 14% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.6% annually. So it's pretty clear that, while GMS' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for GMS. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of GMS' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on GMS. Long-term earnings power is much more important than next year's profits. We have forecasts for GMS going out to 2026, 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 1 warning sign with GMS , and understanding this should be part of your investment process.
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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.
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