The market turned a keen eye to Kelly Services, Inc. ( NASDAQ:KELY.A ) today, when the analysts downgraded their forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. The stock price has risen 4.7% to US$20.38 over the past week.
Following the latest downgrade, the current consensus, from the three analysts covering Kelly Services, is for revenues of US$4.1b in 2024, which would reflect a definite 15% reduction in Kelly Services' sales over the past 12 months. Statutory earnings per share are presumed to soar 185% to US$1.91. Previously, the analysts had been modelling revenues of US$5.1b and earnings per share (EPS) of US$1.92 in 2024. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a measurable cut to revenues and reconfirming their earnings per share estimates.
Investors should be aware that the cuts to analyst forecasts are due to Kelly Services entering into an agreement to sell its European Staffing Business to Gi Group Holdings S.P.A.
The average price target was steady at US$26.67 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. While the latest updates imply that Kelly Services' revenues will decline at an annualised rate of 12% to the end of 2024 due to the divestiture, this actually tops off a historical decline of 2.6% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 6.5% per year. So while a broad number of companies are forecast to grow, unfortunately Kelly Services is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. The analysts downgraded their revenue estimates due to the sale of the European staffing business, however, the latest forecasts imply the business will still grow sales slower than the wider market. Overall, given the forecasted sales growth, we'd be feeling a little more wary of Kelly Services going forwards.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Kelly Services going out to 2025, 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 .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.