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Earnings Release: Here's Why Analysts Cut Their Farmer Bros. Co. (NASDAQ:FARM) Price Target To US$6.50

Simply Wall St
·3 min read

Farmer Bros. Co. (NASDAQ:FARM) missed earnings with its latest first-quarter results, disappointing overly-optimistic forecasters. Revenues missed expectations somewhat, coming in at US$97m, but statutory earnings fell catastrophically short, with a loss of US$0.37 some 139% larger than what the analysts had predicted. The 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Farmer Bros

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After the latest results, the consensus from Farmer Bros' two analysts is for revenues of US$450.1m in 2021, which would reflect a small 2.1% decline in sales compared to the last year of performance. The loss per share is expected to greatly reduce in the near future, narrowing 88% to US$0.34. Before this earnings announcement, the analysts had been modelling revenues of US$466.6m and losses of US$0.43 per share in 2021. Although the revenue estimates have fallen somewhat, Farmer Bros'future looks a little different to the past, with a the loss per share forecasts in particular.

The consensus price target fell 19% to US$6.50, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.1%, a significant reduction from annual growth of 0.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.0% next year. It's pretty clear that Farmer Bros' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Farmer Bros' future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Farmer Bros going out as far as 2022, and you can see them free on our platform here.

You still need to take note of risks, for example - Farmer Bros has 4 warning signs we think you should be aware 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.

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