Last week, you might have seen that Benchmark Electronics, Inc. (NYSE:BHE) released its first-quarter result to the market. The early response was not positive, with shares down 3.6% to US$19.83 in the past week. Revenues were US$515m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.10, an impressive 131% ahead of estimates. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the three analysts covering Benchmark Electronics provided consensus estimates of US$2.02b revenue in 2020, which would reflect a small 7.3% decline on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 37% to US$0.49. Before this earnings report, the analysts had been forecasting revenues of US$2.17b and earnings per share (EPS) of US$0.69 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a large cut to earnings per share numbers.
The consensus price target fell 5.5% to US$26.00, with the weaker earnings outlook clearly leading valuation estimates. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Benchmark Electronics at US$28.00 per share, while the most bearish prices it at US$24.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Benchmark Electronics is an easy business to forecast or that the the analysts are all using similar assumptions.
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 more thing stood out to us about these estimates, and it's the idea that Benchmark Electronics'decline is expected to accelerate, with revenues forecast to fall 7.3% next year, topping off a historical decline of 1.8% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.8% per year. So while a broad number of companies are forecast to decline, unfortunately Benchmark Electronics is expected to see its sales affected worse than other companies in the 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Benchmark Electronics' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Benchmark Electronics. Long-term earnings power is much more important than next year's profits. We have forecasts for Benchmark Electronics going out to 2021, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 4 warning signs for Benchmark Electronics that you need to be mindful of.
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