It's been a pretty great week for Whole Earth Brands, Inc. (NASDAQ:FREE) shareholders, with its shares surging 17% to US$6.60 in the week since its latest quarterly results. Results overall were not great, with earnings of US$0.03 per share falling drastically short of analyst expectations. Meanwhile revenues hit US$134m and were slightly better than forecasts. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Whole Earth Brands' six analysts are now forecasting revenues of US$537.4m in 2022. This would be a satisfactory 2.2% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to accumulate 9.8% to US$0.33. Before this earnings report, the analysts had been forecasting revenues of US$534.9m and earnings per share (EPS) of US$0.48 in 2022. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
The average price target fell 8.1% to US$13.00, with reduced earnings forecasts clearly tied to a lower valuation estimate. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Whole Earth Brands, with the most bullish analyst valuing it at US$16.00 and the most bearish at US$9.00 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Whole Earth Brands' revenue growth is expected to slow, with the forecast 4.5% annualised growth rate until the end of 2022 being well below the historical 29% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.6% per year. Even after the forecast slowdown in growth, it seems obvious that Whole Earth Brands is also expected to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Whole Earth Brands. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Whole Earth Brands. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Whole Earth Brands analysts - going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Whole Earth Brands (of which 1 is concerning!) you should know about.
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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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