Shareholders of RBC Bearings Incorporated (NASDAQ:ROLL) will be pleased this week, given that the stock price is up 17% to US$182 following its latest third-quarter results. Revenues of US$177m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$1.22, missing estimates by 2.2%. 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 analysts are expecting for next year.
Following the latest results, RBC Bearings's five analysts are now forecasting revenues of US$781.6m in 2021. This would be a satisfactory 8.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to climb 11% to US$5.57. Yet prior to the latest earnings, analysts had been forecasting revenues of US$800.8m and earnings per share (EPS) of US$5.67 in 2021. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
Analysts have also increased their price target 5.9% to US$174, clearly signalling that lower revenue forecasts next year are not expected to have a material impact on RBC Bearings's 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. The most optimistic RBC Bearings analyst has a price target of US$188 per share, while the most pessimistic values it at US$140. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Next year brings more of the same, according to analysts, with revenue forecast to grow 8.0%, in line with its 8.8% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 1.6% next year. So although RBC Bearings is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple RBC Bearings analysts - going out to 2021, and you can see them free on our platform here.
We also provide an overview of the RBC Bearings Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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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