Last week saw the newest yearly earnings release from H.B. Fuller Company (NYSE:FUL), an important milestone in the company's journey to build a stronger business. Revenues were in line with forecasts, at US$3.7b, although statutory earnings per share came in 12% below what the analysts expected, at US$3.26 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for H.B. Fuller
Following last week's earnings report, H.B. Fuller's six analysts are forecasting 2023 revenues to be US$3.76b, approximately in line with the last 12 months. Statutory earnings per share are predicted to shoot up 22% to US$4.08. Before this earnings report, the analysts had been forecasting revenues of US$3.94b and earnings per share (EPS) of US$3.99 in 2023. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
There's been no real change to the average price target of US$81.00, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on H.B. Fuller, with the most bullish analyst valuing it at US$106 and the most bearish at US$70.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the H.B. Fuller's past performance and to peers in the same industry. We would highlight that H.B. Fuller's revenue growth is expected to slow, with the forecast 0.3% annualised growth rate until the end of 2023 being well below the historical 6.4% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.2% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than H.B. Fuller.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around H.B. Fuller's earnings potential next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, long term profitability is more important for the value creation process. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on H.B. Fuller. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple H.B. Fuller analysts - going out to 2025, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for H.B. Fuller you should be aware of, and 1 of them shouldn't be ignored.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.