Eagle Materials Inc. (NYSE:EXP) shareholders are probably feeling a little disappointed, since its shares fell 6.6% to US$85.25 in the week after its latest quarterly results. It looks like a credible result overall – although revenues of US$448m were what the analysts expected, Eagle Materials surprised by delivering a (statutory) profit of US$2.31 per share, an impressive 29% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Eagle Materials after the latest results.
Check out our latest analysis for Eagle Materials
Taking into account the latest results, Eagle Materials’ seven analysts currently expect revenues in 2021 to be US$1.55b, approximately in line with the last 12 months. Per-share earnings are expected to jump 106% to US$6.95. In the lead-up to this report, the analysts had been modelling revenues of US$1.56b and earnings per share (EPS) of US$6.64 in 2021. So the consensus seems to have become somewhat more optimistic on Eagle Materials’ earnings potential following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 5.9% to US$99.88. 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. There are some variant perceptions on Eagle Materials, with the most bullish analyst valuing it at US$115 and the most bearish at US$70.00 per share. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.5%, a significant reduction from annual growth of 6.2% 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 4.7% annually for the foreseeable future. It’s pretty clear that Eagle Materials’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Eagle Materials following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Eagle Materials’ revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Eagle Materials going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Eagle Materials that you need to take into consideration.
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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