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Earnings Miss: Commerce Bancshares, Inc. Missed EPS By 36% And Analysts Are Revising Their Forecasts

Simply Wall St

It's been a good week for Commerce Bancshares, Inc. (NASDAQ:CBSH) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.2% to US$58.85. It looks like a pretty bad result, all things considered. Although revenues of US$324m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 36% to hit US$0.34 per share. Following the result, the 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Commerce Bancshares

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the most recent consensus for Commerce Bancshares from nine analysts is for revenues of US$1.32b in 2020 which, if met, would be a meaningful 15% increase on its sales over the past 12 months. Statutory earnings per share are expected to sink 14% to US$2.28 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.32b and earnings per share (EPS) of US$2.51 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$56.20, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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 Commerce Bancshares analyst has a price target of US$70.00 per share, while the most pessimistic values it at US$35.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Commerce Bancshares' rate of growth is expected to accelerate meaningfully, with the forecast 15% revenue growth noticeably faster than its historical growth of 4.3%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Commerce Bancshares to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Commerce Bancshares. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$56.20, 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 estimates - from multiple Commerce Bancshares analysts - going out to 2022, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Commerce Bancshares that you need to be mindful of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.