- Oops!Something went wrong.Please try again later.
The analysts covering Forward Air Corporation (NASDAQ:FWRD) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the six analysts covering Forward Air provided consensus estimates of US$1.2b revenue in 2020, which would reflect a considerable 16% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plummet 57% to US$1.16 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.4b and earnings per share (EPS) of US$2.05 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
The consensus price target fell 9.4% to US$49.25, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. Currently, the most bullish analyst values Forward Air at US$55.00 per share, while the most bearish prices it at US$48.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Forward Air is an easy business to forecast or that the underlying assumptions are knowable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, a significant reduction from annual growth of 11% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Forward Air is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Forward Air. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Forward Air analysts - going out to 2021, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.