One thing we could say about the analysts on Cognex Corporation (NASDAQ:CGNX) - 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 the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Cognex's 16 analysts is for revenues of US$975m in 2022, which would reflect a definite 10% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to tumble 26% to US$1.10 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$1.63 in 2022. Indeed, we can see that the analysts are a lot more bearish about Cognex's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 19% to US$52.19, 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. Currently, the most bullish analyst values Cognex at US$75.00 per share, while the most bearish prices it at US$40.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 19% by the end of 2022. This indicates a significant reduction from annual growth of 8.1% 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 6.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Cognex is expected to lag 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 Cognex. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Cognex's 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 Cognex.
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 Cognex going out to 2024, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here