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As you might know, Guess', Inc. (NYSE:GES) just kicked off its latest quarterly results with some very strong numbers. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 10% higher than the analysts had forecast, at US$569m, while EPS were US$0.41 beating analyst models by 1,950%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. 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 five analysts covering Guess' are now predicting revenues of US$2.32b in 2022. If met, this would reflect a decent 12% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Guess' forecast to report a statutory profit of US$1.70 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.31b and earnings per share (EPS) of US$1.53 in 2022. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the decent improvement in earnings per share expectations following these results.
The consensus price target rose 34% to US$18.75, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Guess', with the most bullish analyst valuing it at US$20.00 and the most bearish at US$13.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Guess''s growth to accelerate, with the forecast 12% growth ranking favourably alongside historical growth of 2.6% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 9.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Guess' is expected to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Guess''s earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate 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 Guess'. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Guess' analysts - going out to 2025, and you can see them free on our platform here.
You still need to take note of risks, for example - Guess' has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
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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