Analysts Have Been Trimming Their Bodycote plc (LON:BOY) Price Target After Its Latest Report
The investors in Bodycote plc's (LON:BOY) will be rubbing their hands together with glee today, after the share price leapt 20% to UK£5.42 in the week following its yearly results. It was a credible result overall, with revenues of UK£720m and statutory earnings per share of UK£0.49 both in line with analyst estimates, showing that Bodycote 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.
Check out our latest analysis for Bodycote
Taking into account the latest results, the current consensus, from the 13 analysts covering Bodycote, is for revenues of UK£652.7m in 2020, which would reflect a considerable 9.3% reduction in Bodycote's sales over the past 12 months. Statutory earnings per share are expected to tumble 43% to UK£0.28 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£638.3m and earnings per share (EPS) of UK£0.29 in 2020. So it's pretty clear consensus is mixed on Bodycote after the latest results; whilethe analysts lifted revenue numbers, they also administered a small dip in per-share earnings expectations.
The analysts also cut Bodycote's price target 7.0% to UK£6.76, implying that lower forecast earnings are expected to have a more negative impact than can be offset by the increase in sales. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Bodycote at UK£9.60 per share, while the most bearish prices it at UK£4.77. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 9.3% revenue decline a notable change from historical growth of 5.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.3% annually for the foreseeable future. It's pretty clear that Bodycote's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Bodycote. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to 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.
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 estimates - from multiple Bodycote analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Bodycote that we have uncovered.
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