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Earnings Release: Here's Why Analysts Cut Their Genesco Inc. Price Target To US$29.00

Simply Wall St

Shareholders in Genesco Inc. (NYSE:GCO) had a terrible week, as shares crashed 24% to US$22.10 in the week since its latest annual results. It was an okay result overall, with revenues coming in at US$2.2b, roughly what analysts had been expecting. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

Check out our latest analysis for Genesco

NYSE:GCO Past and Future Earnings, March 14th 2020

Taking into account the latest results, the current consensus from Genesco's four analysts is for revenues of US$2.27b in 2021, which would reflect an okay 3.3% increase on its sales over the past 12 months. Statutory earnings per share are expected to jump 31% to US$5.22. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.23b and earnings per share (EPS) of US$4.95 in 2021. So the consensus seems to have become somewhat more optimistic on Genesco's earnings potential following these results.

The average analyst price target fell 47% to US$29.00, suggesting that analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Genesco analyst has a price target of US$33.00 per share, while the most pessimistic values it at US$24.00. 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. One thing stands out from these estimates, which is that analysts are forecasting Genesco to grow faster in the future than it has in the past, with revenues expected to grow 3.3%. If achieved, this would be a much better result than the 8.9% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.2% per year. So although Genesco's revenue growth is expected to improve, it is still expected to grow slower than the market.

The Bottom Line

The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Genesco's earnings potential next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Genesco's revenues are expected to 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.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Genesco going out to 2023, and you can see them free on our platform here..

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.