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The Forterra plc (LON:FORT) Interim Results Are Out And Analysts Have Published New Forecasts

It's been a good week for Forterra plc (LON:FORT) shareholders, because the company has just released its latest interim results, and the shares gained 9.3% to UK£1.86. Forterra reported in line with analyst predictions, delivering revenues of UK£122m and statutory earnings per share of UK£0.24, suggesting the business is executing well and in line with its plan. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Forterra

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Taking into account the latest results, the current consensus, from the nine analysts covering Forterra, is for revenues of UK£273.2m in 2020, which would reflect a not inconsiderable 12% reduction in Forterra's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 1,329% (on a statutory basis) to UK£0.029. Before this earnings report, the analysts had been forecasting revenues of UK£264.0m and earnings per share (EPS) of UK£0.0078 in 2020. While they've upgraded their revenue numbers for next year, the consensus also expects losses to increase, perhaps due to the investments required to grow revenue. In any event, it's not clear that these new estimates are particularly bullish.

There was no major change to the consensus price target of UK£2.23, with growing revenues seemingly enough to offset the concern of growing losses. 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 Forterra analyst has a price target of UK£2.50 per share, while the most pessimistic values it at UK£1.94. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 12%, a significant reduction from annual growth of 3.2% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Forterra is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting Forterra to become unprofitable next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at UK£2.23, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Forterra going out to 2023, 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 Forterra (1 is a bit unpleasant!) that we have uncovered.

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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