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One thing we could say about the analysts on Universal Electronics Inc. (NASDAQ:UEIC) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the three analysts covering Universal Electronics provided consensus estimates of US$656m revenue in 2020, which would reflect a not inconsiderable 9.0% decline on its sales over the past 12 months. Per-share earnings are expected to surge 240% to US$2.56. Before this latest update, the analysts had been forecasting revenues of US$740m and earnings per share (EPS) of US$3.01 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
The consensus price target fell 8.3% to US$62.33, with the weaker earnings outlook clearly leading analyst 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. The most optimistic Universal Electronics analyst has a price target of US$64.00 per share, while the most pessimistic values it at US$60.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Universal Electronics' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 9.0% revenue decline a notable change from historical growth of 5.1% 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 2.3% annually for the foreseeable future. It's pretty clear that Universal Electronics' 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 Universal Electronics. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Universal Electronics' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Universal Electronics.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Universal Electronics going out to 2021, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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