Results: Jack Henry & Associates, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates
Jack Henry & Associates, Inc. (NASDAQ:JKHY) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The company beat expectations with revenues of US$419m arriving 2.3% ahead of forecasts. Statutory earnings per share (EPS) were US$0.94, 5.4% ahead of estimates. 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've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
View our latest analysis for Jack Henry & Associates
Following the latest results, Jack Henry & Associates's eleven analysts are now forecasting revenues of US$1.69b in 2020. This would be an okay 3.8% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$3.72, roughly flat on the last 12 months. Before this earnings report, analysts had been forecasting revenues of US$1.66b and earnings per share (EPS) of US$3.66 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 analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 7.3% to US$157. It looks as though analysts previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Jack Henry & Associates, with the most bullish analyst valuing it at US$184 and the most bearish at US$120 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect Jack Henry & Associates's revenue growth will slow down substantially, with revenues next year expected to grow 3.8%, compared to a historical growth rate of 5.4% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 11% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Jack Henry & Associates.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Jack Henry & Associates's revenues are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Jack Henry & Associates. Long-term earnings power is much more important than next year's profits. We have forecasts for Jack Henry & Associates going out to 2022, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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