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There's been a notable change in appetite for Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) shares in the week since its quarterly report, with the stock down 10% to US$34.88. It looks like a pretty bad result, all things considered. Although revenues of US$264m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 64% to hit US$0.37 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the nine analysts covering Pinnacle Financial Partners are now predicting revenues of US$1.11b in 2020. If met, this would reflect a decent 18% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to crater 25% to US$3.29 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.07b and earnings per share (EPS) of US$4.46 in 2020. So it's pretty clear the analysts have mixed opinions on Pinnacle Financial Partners after the latest results; even though they upped their revenue numbers, it came at the cost of a large cut to per-share earnings expectations.
There's been no major changes to the price target of US$44.44, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation. 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. There are some variant perceptions on Pinnacle Financial Partners, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$36.00 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Pinnacle Financial Partners' revenue growth is expected to slow, with forecast 18% increase next year well below the historical 28%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.9% next year. Even after the forecast slowdown in growth, it seems obvious that Pinnacle Financial Partners is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 Pinnacle Financial Partners analysts - going out to 2021, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Pinnacle Financial Partners you should be aware of.
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