Forterra, Inc. (NASDAQ:FRTA) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It was a credible result overall, with revenues of US$426m and statutory earnings per share of US$0.40 both in line with analyst estimates, showing that Forterra 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following last week's earnings report, Forterra's four analysts are forecasting 2020 revenues to be US$1.60b, approximately in line with the last 12 months. Statutory earnings per share are predicted to jump 85% to US$0.80. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.58b and earnings per share (EPS) of US$0.64 in 2020. Although the revenue estimates have not really changed, we can see there's been a sizeable expansion in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 8.3% to US$14.60. 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 Forterra, with the most bullish analyst valuing it at US$19.00 and the most bearish at US$11.00 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past three years have seen sales shrink three years annually. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 4.7% next year. So it's pretty clear that, although revenues are improving, Forterra is still expected to grow slower than the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Forterra's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Forterra's revenues 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Forterra going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Forterra (1 shouldn't be ignored!) that you should be aware of.
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. 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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