Ethan Allen Interiors Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
It's been a sad week for Ethan Allen Interiors Inc. (NYSE:ETH), who've watched their investment drop 12% to US$14.58 in the week since the company reported its second-quarter result. Ethan Allen Interiors reported US$175m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.27 beat expectations, being 6.6% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
View our latest analysis for Ethan Allen Interiors
Following the recent earnings report, the consensus fromfive analysts covering Ethan Allen Interiors expects revenues of US$679.8m in 2020, implying a measurable 4.3% decline in sales compared to the last 12 months. Statutory earnings per share are expected to leap 43% to US$1.38. Yet prior to the latest earnings, analysts had been forecasting revenues of US$699.0m and earnings per share (EPS) of US$1.52 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The consensus price target fell 8.6% to US$16.00, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Ethan Allen Interiors analyst has a price target of US$16.00 per share, while the most pessimistic values it at US$16.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. One thing that stands out from these estimates is that, even though revenues are forecast to keep falling, the decline is expected to accelerate. Analysts have modelled a 4.3% decline next year, compared to a historical decline of 0.7% per annum for the past five years. Compare this with our data on other companies (with analyst coverage) in a similar industry, which in aggregate are forecast to see their revenue decline 5.4% per year. So it looks like Ethan Allen Interiors is also expected to see its revenues decline at a faster rate than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Ethan Allen Interiors. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Ethan Allen Interiors going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Ethan Allen Interiors Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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