It's been a mediocre week for Brookline Bancorp, Inc. (NASDAQ:BRKL) shareholders, with the stock dropping 11% to US$9.39 in the week since its latest quarterly results. Revenues of US$71m beat expectations by 2.5%. Unfortunately statutory earnings per share (EPS) fell well short of the mark, turning in a loss of US$0.22 compared to previous analyst expectations of a profit. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Brookline Bancorp from five analysts is for revenues of US$277.8m in 2020 which, if met, would be a major 25% increase on its sales over the past 12 months. Statutory earnings per share are forecast to tumble 37% to US$0.38 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$280.3m and earnings per share (EPS) of US$0.94 in 2020. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
It might be a surprise to learn that the consensus price target fell 9.9% to US$12.50, with the analysts clearly linking lower forecast earnings to the performance of the stock price. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Brookline Bancorp, with the most bullish analyst valuing it at US$13.50 and the most bearish at US$12.00 per share. This is a very narrow spread of estimates, implying either that Brookline Bancorp is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Brookline Bancorp's rate of growth is expected to accelerate meaningfully, with the forecast 25% revenue growth noticeably faster than its historical growth of 6.4%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 2.8% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Brookline Bancorp to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Brookline Bancorp. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Brookline Bancorp going out to 2021, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Brookline Bancorp that you should be aware of.
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