It's been a good week for Northwest Bancshares, Inc. (NASDAQ:NWBI) shareholders, because the company has just released its latest quarterly results, and the shares gained 2.7% to US$10.61. It looks like a pretty bad result, all things considered. Although revenues of US$115m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 58% to hit US$0.07 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Northwest Bancshares from five analysts is for revenues of US$512.8m in 2020 which, if met, would be a huge 22% increase on its sales over the past 12 months. Statutory earnings per share are forecast to nosedive 43% to US$0.50 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$511.4m and earnings per share (EPS) of US$0.67 in 2020. So there's definitely been a decline in 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 fell 6.3% to US$9.83, with the analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Northwest Bancshares at US$10.50 per share, while the most bearish prices it at US$9.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Northwest Bancshares is an easy business to forecast or that the the analysts are all using similar assumptions.
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. The analysts are definitely expecting Northwest Bancshares'growth to accelerate, with the forecast 22% growth ranking favourably alongside historical growth of 7.1% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 0.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Northwest Bancshares to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Northwest Bancshares. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts 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. We have estimates - from multiple Northwest Bancshares analysts - going out to 2021, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Northwest Bancshares that you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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