As you might know, Cubic Corporation (NYSE:CUB) recently reported its first-quarter numbers. It looks like the results were pretty good overall. While revenues of US$329m were in line with analyst predictions, statutory losses were much smaller than expected, with Cubic losing US$0.66 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Cubic from six analysts is for revenues of US$1.61b in 2020, which is a credible 5.6% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 8.7% to US$1.31. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.60b and earnings per share (EPS) of US$1.89 in 2020. So there's definitely been a decline in analyst 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 was broadly unchanged at US$75.83, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Cubic at US$82.00 per share, while the most bearish prices it at US$67.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Cubic's past performance and to peers in the same market. One thing stands out from these estimates, which is that analysts are forecasting Cubic to grow faster in the future than it has in the past, with revenues expected to grow 5.6%. If achieved, this would be a much better result than the 1.1% annual decline 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 6.2% per year. So it looks like Cubic is expected to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Cubic. Long-term earnings power is much more important than next year's profits. We have forecasts for Cubic going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Cubic's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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