The latest analyst coverage could presage a bad day for Recticel SA/NV (EBR:REC), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
After the downgrade, the consensus from Recticel's three analysts is for revenues of €837m in 2020, which would reflect an uneasy 19% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of €0.02 per share in 2020. Previously, the analysts had been modelling revenues of €1.1b and earnings per share (EPS) of €0.54 in 2020. There looks to have been a major change in sentiment regarding Recticel's prospects, with a sizeable cut to revenues and the analysts now forecasting a loss instead of a profit.
View our latest analysis for Recticel
The consensus price target fell 10.0% to €9.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Recticel at €11.00 per share, while the most bearish prices it at €7.00. 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.
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 19% revenue decline a notable change from historical growth of 1.9% 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 3.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Recticel is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Recticel to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Recticel's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Recticel.