Shareholders will be ecstatic, with their stake up 22% over the past week following Insteel Industries, Inc.'s (NASDAQ:IIIN) latest quarterly results. It was overall a positive result, with revenues beating expectations by 7.3% to hit US$98m. Insteel Industries also reported a statutory profit of US$0.03, which was a nice improvement from the loss that analysts were predicting. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the dual analysts covering Insteel Industries provided consensus estimates of US$428.0m revenue in 2020, which would reflect a perceptible 4.7% decline on its sales over the past 12 months. Statutory earnings per share are expected to jump 375% to US$0.50. Yet prior to the latest earnings, analysts had been forecasting revenues of US$420.4m and earnings per share (EPS) of US$1.72 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the large cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$25.50, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation.
Further, we can compare these estimates to past performance, and see how Insteel Industries forecasts compare to the wider market's forecast performance. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.7% a significant reduction from annual growth of 0.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 4.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Insteel Industries to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$25.50, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Insteel Industries. 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 also provide an overview of the Insteel Industries Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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