It's been a sad week for Provident Financial Services, Inc. (NYSE:PFS), who've watched their investment drop 16% to US$11.32 in the week since the company reported its quarterly result. It looks like a pretty bad result, all things considered. Although revenues of US$89m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 32% to hit US$0.23 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Provident Financial Services from four analysts is for revenues of US$387.1m in 2020 which, if met, would be a solid 15% increase on its sales over the past 12 months. Statutory earnings per share are expected to plummet 40% to US$0.91 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$387.0m and earnings per share (EPS) of US$0.90 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With no major changes to earnings forecasts, the consensus price target fell 9.9% to US$16.40, suggesting that the analysts might have previously been hoping for an earnings upgrade. 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 Provident Financial Services, with the most bullish analyst valuing it at US$23.00 and the most bearish at US$12.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Provident Financial Services' rate of growth is expected to accelerate meaningfully, with the forecast 15% revenue growth noticeably faster than its historical growth of 3.9%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 1.1% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Provident Financial Services is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Provident Financial Services analysts - going out to 2022, 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 Provident Financial Services you should be aware of.
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