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It's been a sad week for Cal-Maine Foods, Inc. (NASDAQ:CALM), who've watched their investment drop 11% to US$38.03 in the week since the company reported its second-quarter result. Revenues fell 5.0% short of expectations, at US$312m. Earnings correspondingly dipped, with Cal-Maine Foods reporting a statutory loss of US$0.21 per share, whereas analysts had previously modelled a profit in this period. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, Cal-Maine Foods's two analysts are forecasting 2020 revenues to be US$1.23b, approximately in line with the last 12 months. Before this earnings report, analysts had been forecasting revenues of US$1.28b and earnings per share (EPS) of US$0.17 in 2020. Analysts have made an abrupt about-face on Cal-Maine Foods, administering a a minor downgrade to to revenue forecasts and slashing earnings forecasts from profit to loss.
The average analyst price target lifted 6.3% to US$38.25, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term.
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. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, Cal-Maine Foods's sales have shrunk approximately 5.7% annually over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 2.8% next year. Although Cal-Maine Foods's revenues are expected to improve, it seems that analysts are still expecting it to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts are expecting Cal-Maine Foods to become unprofitable next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. 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 analyst estimates for Cal-Maine Foods going out as far as 2022, and you can see them free on our platform here.
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