Investors in Kelly Services, Inc. (NASDAQ:KELY.A) had a good week, as its shares rose 4.3% to close at US$18.13 following the release of its third-quarter results. It looks like a credible result overall - although revenues of US$1.0b were what the analysts expected, Kelly Services surprised by delivering a (statutory) profit of US$0.42 per share, an impressive 310% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following the latest results, Kelly Services' four analysts are now forecasting revenues of US$4.80b in 2021. This would be an okay 4.0% improvement in sales compared to the last 12 months. Kelly Services is also expected to turn profitable, with statutory earnings of US$1.75 per share. Before this earnings report, the analysts had been forecasting revenues of US$4.90b and earnings per share (EPS) of US$1.76 in 2021. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average price target was steady at US$23.00even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Kelly Services analyst has a price target of US$26.00 per share, while the most pessimistic values it at US$20.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. For example, we noticed that Kelly Services' rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 4.0%, well above its historical decline of 1.4% 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 8.0% per year. Although Kelly Services' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$23.00, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Kelly Services going out to 2022, and you can see them free on our platform here.
We also provide an overview of the Kelly Services Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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. 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.
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