Analysts Just Shaved Their Builders FirstSource, Inc. (NYSE:BLDR) Forecasts Dramatically

Today is shaping up negative for Builders FirstSource, Inc. (NYSE:BLDR) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Builders FirstSource recently, with the stock price up a notable 16% to US$65.88 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the latest downgrade, the 13 analysts covering Builders FirstSource provided consensus estimates of US$16b revenue in 2023, which would reflect a substantial 30% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to crater 68% to US$6.04 in the same period. Previously, the analysts had been modelling revenues of US$18b and earnings per share (EPS) of US$7.56 in 2023. Indeed, we can see that the analysts are a lot more bearish about Builders FirstSource's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Builders FirstSource

It'll come as no surprise then, to learn that the analysts have cut their price target 14% to US$78.64. 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 Builders FirstSource, with the most bullish analyst valuing it at US$95.00 and the most bearish at US$66.00 per share. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 25% by the end of 2023. This indicates a significant reduction from annual growth of 29% 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. It's pretty clear that Builders FirstSource's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Builders FirstSource. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Builders FirstSource.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Builders FirstSource, including a weak balance sheet. Learn more, and discover the 1 other warning sign we've identified, for free on our platform here.

You can also see our analysis of Builders FirstSource's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.

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