As you might know, The Gorman-Rupp Company (NYSE:GRC) last week released its latest quarterly, and things did not turn out so great for shareholders. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$92m, statutory earnings missed forecasts by an incredible 38%, coming in at just US$0.21 per share. This is an important time for investors, as they can track a company's performance in its report, look at what expert is forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analyst has changed their mind on Gorman-Rupp after the latest results.
Taking into account the latest results, the current consensus, from the sole analyst covering Gorman-Rupp, is for revenues of US$368.4m in 2020, which would reflect a discernible 6.3% reduction in Gorman-Rupp's sales over the past 12 months. Statutory earnings per share are forecast to drop 19% to US$1.05 in the same period. Before this earnings report, the analyst had been forecasting revenues of US$412.2m and earnings per share (EPS) of US$1.44 in 2020. Indeed, we can see that the analyst is a lot more bearish about Gorman-Rupp's prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 6.8% to US$41.00, with the weaker earnings outlook clearly leading valuation estimates.
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. One more thing stood out to us about these estimates, and it's the idea that Gorman-Rupp'sdecline is expected to accelerate, with revenues forecast to fall 6.3% next year, topping off a historical decline of 0.3% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 1.7% next year. So while a broad number of companies are forecast to decline, unfortunately Gorman-Rupp is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analyst downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analyst also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for Gorman-Rupp that you should be aware of.
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