The investors in Steelcase Inc.'s (NYSE:SCS) will be rubbing their hands together with glee today, after the share price leapt 32% to US$11.55 in the week following its yearly results. Revenues were US$3.7b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$1.66 were also better than expected, beating analyst predictions by 18%. 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.
Taking into account the latest results, the current consensus, from the two analysts covering Steelcase, is for revenues of US$3.35b in 2021, which would reflect an uncomfortable 10% reduction in Steelcase's sales over the past 12 months. The company is forecast to report a statutory loss of US$0.25 in 2021, a sharp decline from a profit over the last year. Before this earnings report, the analysts had been forecasting revenues of US$3.67b and earnings per share (EPS) of US$1.07 in 2021. There looks to have been a significant drop in sentiment regarding Steelcase's prospects after these latest results, with a small dip in revenues and the analysts now forecasting a loss instead of a profit.
The average price target fell 29% to US$10.00, implicitly signalling that lower earnings per share are a leading indicator for Steelcase's valuation.
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 sales are expected to reverse, with the forecast 10% revenue decline a notable change from historical growth of 4.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Steelcase is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Steelcase to become unprofitable next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.
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 least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
Plus, you should also learn about the 5 warning signs we've spotted with Steelcase (including 1 which is concerning) .
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