It's been a good week for Raven Industries, Inc. (NASDAQ:RAVN) shareholders, because the company has just released its latest first-quarter results, and the shares gained 6.5% to US$20.61. Raven Industries missed revenue estimates by 4.1%, with sales of US$86m, although statutory earnings per share (EPS) of US$0.11 beat expectations, coming in 10.0% ahead of analyst estimates. 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.
Following the recent earnings report, the consensus from three analysts covering Raven Industries is for revenues of US$358.4m in 2021, implying a perceptible 3.3% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to tumble 61% to US$0.28 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$364.5m and earnings per share (EPS) of US$0.38 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target fell 21% to US$27.00, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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. There are some variant perceptions on Raven Industries, with the most bullish analyst valuing it at US$32.00 and the most bearish at US$19.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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 sales are expected to reverse, with the forecast 3.3% revenue decline a notable change from historical growth of 8.0% 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 5.0% annually for the foreseeable future. It's pretty clear that Raven Industries' revenues are expected to perform substantially worse 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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Raven Industries' revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Raven Industries' future valuation.
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. At Simply Wall St, we have a full range of analyst estimates for Raven Industries going out to 2023, and you can see them free on our platform here..
Before you take the next step you should know about the 2 warning signs for Raven Industries that we have uncovered.
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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. Thank you for reading.