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Analysts Are Updating Their West Fraser Timber Co. Ltd. (TSE:WFG) Estimates After Its Third-Quarter Results
It's shaping up to be a tough period for West Fraser Timber Co. Ltd. (TSE:WFG), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Revenues missed expectations somewhat, coming in at US$1.4b, but statutory earnings fell catastrophically short, with a loss of US$1.02 some 26% larger than what the analysts had predicted. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on West Fraser Timber after the latest results.
Taking into account the latest results, the consensus forecast from West Fraser Timber's six analysts is for revenues of US$5.93b in 2027. This reflects a meaningful 12% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with West Fraser Timber forecast to report a statutory profit of US$0.53 per share. In the lead-up to this report, the analysts had been modelling revenues of US$6.09b and earnings per share (EPS) of US$0.90 in 2027. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a large cut to earnings per share numbers.
Check out our latest analysis for West Fraser Timber
The analysts made no major changes to their price target of CA$104, suggesting the downgrades are not expected to have a long-term impact on West Fraser Timber's valuation. 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 West Fraser Timber, with the most bullish analyst valuing it at CA$111 and the most bearish at CA$97.10 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
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. One thing stands out from these estimates, which is that West Fraser Timber is forecast to grow faster in the future than it has in the past, with revenues expected to display 9.5% annualised growth until the end of 2027. If achieved, this would be a much better result than the 16% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.4% per year. So it looks like West Fraser Timber is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for West Fraser Timber. They also downgraded West Fraser Timber's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for West Fraser Timber going out to 2028, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for West Fraser Timber you should know about.
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