Avnet, Inc. (NASDAQ:AVT) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Sales of US$4.5b surpassed estimates by 2.5%, although statutory earnings per share missed badly, coming in 82% below expectations at US$0.04 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus fromnine analysts covering Avnet expects revenues of US$17.9b in 2020, implying a noticeable 3.4% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to descend 15% to US$0.87 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$17.8b and earnings per share (EPS) of US$1.31 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the large cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$39.78, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Avnet analyst has a price target of US$47.00 per share, while the most pessimistic values it at US$35.00. 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Over the past five years, revenues have declined around 5.2% annually. On the bright side, analysts expect the decline to level off somewhat, with the forecast for a 3.4% decline in revenue next year. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 5.1% next year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Avnet to suffer less severely than 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. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Avnet's revenues are expected to perform worse than the wider market. The consensus price target held steady at US$39.78, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Avnet analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Avnet's balance sheet, and whether we think Avnet is carrying too much debt, for free on our platform here.
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