Analyst Forecasts Just Became More Bearish On Primo Water Corporation (TSE:PRMW)
Today is shaping up negative for Primo Water Corporation (TSE:PRMW) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Bidders are definitely seeing a different story, with the stock price of CA$20.20 reflecting a 12% rise 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 eight analysts covering Primo Water provided consensus estimates of US$2.1b revenue in 2024, which would reflect a measurable 8.0% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to drop 13% to US$0.64 in the same period. Before this latest update, the analysts had been forecasting revenues of US$2.5b and earnings per share (EPS) of US$0.70 in 2024. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.
Check out our latest analysis for Primo Water
Despite the cuts to forecast earnings, there was no real change to the US$18.08 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Primo Water at US$21.00 per share, while the most bearish prices it at US$15.15. This shows there is still some 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Primo Water's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 6.4% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 2.5% 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 2.6% annually for the foreseeable future. It's pretty clear that Primo Water'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 Primo Water. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Primo Water's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Primo Water going forwards.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Primo Water going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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.
