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Today is shaping up negative for Shenandoah Telecommunications Company (NASDAQ:SHEN) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the current consensus, from the two analysts covering Shenandoah Telecommunications, is for revenues of US$245m in 2021, which would reflect a substantial 62% reduction in Shenandoah Telecommunications' sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 44% to US$0.59 in the same period. Before this latest update, the analysts had been forecasting revenues of US$466m and earnings per share (EPS) of US$1.66 in 2021. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.
Analysts made no major changes to their price target of US$47.00, suggesting the downgrades are not expected to have a long-term impact on Shenandoah Telecommunications' valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Shenandoah Telecommunications analyst has a price target of US$53.00 per share, while the most pessimistic values it at US$40.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 62% revenue decline a notable change from historical growth of 8.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.2% next year. It's pretty clear that Shenandoah Telecommunications' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Shenandoah Telecommunications after the downgrade.
Worse, Shenandoah Telecommunications is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
We also provide an overview of the Shenandoah Telecommunications Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
This article by Simply Wall St is general in nature. 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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