Selective Insurance Group, Inc. Just Missed EPS By 75%: Here's What Analysts Think Will Happen Next
Selective Insurance Group, Inc. (NASDAQ:SIGI) just released its latest quarterly report and things are not looking great. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$665m, statutory earnings missed forecasts by an incredible 75%, coming in at just US$0.25 per share. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Selective Insurance Group after the latest results.
View our latest analysis for Selective Insurance Group
Taking into account the latest results, Selective Insurance Group's seven analysts currently expect revenues in 2020 to be US$2.77b, approximately in line with the last 12 months. Statutory earnings per share are forecast to tumble 20% to US$3.02 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$2.90b and earnings per share (EPS) of US$4.06 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.
Despite the cuts to forecast earnings, there was no real change to the US$54.00 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Selective Insurance Group at US$65.00 per share, while the most bearish prices it at US$48.00. 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.
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 1.5% revenue decline a notable change from historical growth of 6.8% 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 3.0% annually for the foreseeable future. It's pretty clear that Selective Insurance Group's 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$54.00, with the latest estimates not enough to have an impact on their price targets.
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. We have estimates - from multiple Selective Insurance Group analysts - going out to 2021, and you can see them free on our platform here.
Even so, be aware that Selective Insurance Group is showing 1 warning sign in our investment analysis , you should know about...
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