Resources Connection, Inc. Just Recorded A 27% EPS Beat: Here's What Analysts Are Forecasting Next
Resources Connection, Inc. (NASDAQ:RGP) shareholders are probably feeling a little disappointed, since its shares fell 7.3% to US$13.13 in the week after its latest second-quarter results. It looks like a credible result overall - although revenues of US$163m were what the analysts expected, Resources Connection surprised by delivering a (statutory) profit of US$0.14 per share, an impressive 27% above what was forecast. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Resources Connection
Taking into account the latest results, the current consensus, from the three analysts covering Resources Connection, is for revenues of US$647.2m in 2024. This implies an uncomfortable 8.1% reduction in Resources Connection's revenue over the past 12 months. Statutory earnings per share are forecast to tumble 38% to US$0.50 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$679.8m and earnings per share (EPS) of US$0.70 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
The analysts made no major changes to their price target of US$16.00, suggesting the downgrades are not expected to have a long-term impact on Resources Connection's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Resources Connection at US$20.00 per share, while the most bearish prices it at US$13.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. We would highlight that revenue is expected to reverse, with a forecast 16% annualised decline to the end of 2024. That is a notable change from historical growth of 2.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.4% annually for the foreseeable future. It's pretty clear that Resources Connection's revenues are expected to perform substantially worse 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 Resources Connection. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.
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 Resources Connection analysts - going out to 2026, and you can see them free on our platform here.
Even so, be aware that Resources Connection is showing 1 warning sign in our investment analysis , you should know about...
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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.
