Investors in The Container Store Group, Inc. (NYSE:TCS) had a good week, as its shares rose 2.5% to close at US$4.14 following the release of its quarterly results. It was not a great result overall. While revenues of US$229m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 17% to hit US$0.05 per share. 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Container Store Group from three analysts is for revenues of US$948.2m in 2021, which is a reasonable 2.2% increase on its sales over the past 12 months. Statutory earnings per share are expected to jump 42% to US$0.52. In the lead-up to this report, analysts had been modelling revenues of US$948.6m and earnings per share (EPS) of US$0.54 in 2021. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target fell 20% to US$4.50, with analysts clearly linking lower forecast earnings to the performance of the stock price. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Container Store Group at US$4.50 per share, while the most bearish prices it at US$4.50. 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.
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. We would highlight that Container Store Group's revenue growth is expected to slow, with forecast 2.2% increase next year well below the historical 3.4%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.7% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Container Store Group.
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. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Container Store Group going out to 2022, and you can see them free on our platform here..
You can also see whether Container Store Group is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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