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FBL Financial Group, Inc. (NYSE:FFG) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues fell badly short of expectations, with sales of US$135m missing analyst predictions by 30%. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of US$0.10 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the dual analysts covering FBL Financial Group are now predicting revenues of US$725.8m in 2020. If met, this would reflect a satisfactory 2.8% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$3.59, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$765.1m and earnings per share (EPS) of US$4.69 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
What's most unexpected is that the consensus price target rose 12% to US$47.00, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that FBL Financial Group's rate of growth is expected to accelerate meaningfully, with the forecast 2.8% revenue growth noticeably faster than its historical growth of 0.8%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 3.1% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that FBL Financial Group is expected to grow at about the same rate as 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 FBL Financial Group. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on FBL Financial Group. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for FBL Financial Group that you need to be mindful of.
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