It's been a sad week for Donnelley Financial Solutions, Inc. (NYSE:DFIN), who've watched their investment drop 11% to US$8.52 in the week since the company reported its full-year result. Revenues were US$875m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$1.10 were also better than expected, beating analyst predictions by 16%. 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.
Following last week's earnings report, Donnelley Financial Solutions's five analysts are forecasting 2020 revenues to be US$871.8m, approximately in line with the last 12 months. Statutory earnings per share are forecast to shrink 6.1% to US$1.04 in the same period. Before this earnings report, analysts had been forecasting revenues of US$888.5m and earnings per share (EPS) of US$1.18 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the substantial drop in new EPS forecasts.
It might be a surprise to learn that the consensus price target fell 10% to US$13.17, with 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 Donnelley Financial Solutions, with the most bullish analyst valuing it at US$16.00 and the most bearish at US$10.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Further, we can compare these estimates to past performance, and see how Donnelley Financial Solutions forecasts compare to the wider market's forecast performance. One more thing stood out to us about these estimates, and it's that Donnelley Financial Solutions's decline is expected to slow down, with revenues forecast to fall 0.3% next year, improving on a historical decline of 3.5% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline 3.9% per year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Donnelley Financial Solutions to suffer less severely than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Donnelley Financial Solutions. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Donnelley Financial Solutions's future valuation.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Donnelley Financial Solutions going out to 2022, and you can see them free on our platform here.
You can also see whether Donnelley Financial Solutions is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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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