One of the biggest stories of last week was how Limoneira Company (NASDAQ:LMNR) shares plunged 33% in the week since its latest quarterly results, closing yesterday at US$11.48. Revenues of US$42m came in a modest 2.3% below forecasts. Statutory losses were a relative bright spot though, with a per-share loss of US$0.37 coming in a substantial 83% smaller than what analysts had expected. 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 thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Following the latest results, Limoneira's five analysts are now forecasting revenues of US$186.6m in 2020. This would be a solid 9.1% improvement in sales compared to the last 12 months. In the lead-up to this report, analysts had been modelling revenues of US$195.0m and earnings per share (EPS) of US$0.33 in 2020. Analysts have made an abrupt about-face on Limoneira, administering a a minor downgrade to to revenue forecasts and slashing earnings forecasts from profit to loss.
The consensus price target fell 21% to US$19.20, with analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Limoneira at US$25.00 per share, while the most bearish prices it at US$16.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Limoneira shareholders.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Next year brings more of the same, according to analysts, with revenue forecast to grow 9.1%, in line with its 10% annual growth 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 revenues grow 2.5% per year. So it's pretty clear that Limoneira is forecast to grow substantially faster than its market.
The Bottom Line
The biggest low-light for us was that the forecasts for Limoneira dropped from profits to a loss next year. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Limoneira's revenues are expected to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Limoneira's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Limoneira going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Limoneira's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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