Last week, you might have seen that Builders FirstSource, Inc. (NYSE:BLDR) released its second-quarter result to the market. The early response was not positive, with shares down 4.0% to US$153 in the past week. Builders FirstSource reported US$4.5b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$2.87 beat expectations, being 6.4% higher than what the analysts expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Builders FirstSource after the latest results.

View our latest analysis for Builders FirstSource

Following last week's earnings report, Builders FirstSource's 15 analysts are forecasting 2024 revenues to be US$16.9b, approximately in line with the last 12 months. Statutory earnings per share are forecast to sink 19% to US$9.75 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$17.6b and earnings per share (EPS) of US$11.17 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a real cut to earnings per share numbers.

The consensus price target fell 5.6% to US$186, with the weaker earnings outlook clearly leading 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. Currently, the most bullish analyst values Builders FirstSource at US$222 per share, while the most bearish prices it at US$165. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that revenue is expected to reverse, with a forecast 1.7% annualised decline to the end of 2024. That is a notable change from historical growth of 20% 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 5.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Builders FirstSource is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Builders FirstSource's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Builders FirstSource analysts - going out to 2026, 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 Builders FirstSource you should be aware of.

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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.