It's been a good week for Independent Bank Corp. (NASDAQ:INDB) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.2% to US$66.76. It looks like a credible result overall - although revenues of US$119m were what the analysts expected, Independent Bank surprised by delivering a (statutory) profit of US$0.76 per share, an impressive 22% 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Independent Bank from three analysts is for revenues of US$491.5m in 2020 which, if met, would be a modest 7.7% increase on its sales over the past 12 months. Statutory earnings per share are forecast to plunge 33% to US$2.98 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$491.5m and earnings per share (EPS) of US$3.18 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
The consensus price target held steady at US$76.00, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Independent Bank, with the most bullish analyst valuing it at US$85.00 and the most bearish at US$68.00 per share. This is a very narrow spread of estimates, implying either that Independent Bank is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Independent Bank's revenue growth will slow down substantially, with revenues next year expected to grow 7.7%, compared to a historical growth rate of 12% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.0% next year. So it's pretty clear that, while Independent Bank's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
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. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$76.00, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Independent Bank. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Independent Bank analysts - going out to 2022, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Independent Bank (1 is a bit unpleasant!) that you need to take into consideration.
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. 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.
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