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State Auto Financial Corporation Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

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Shareholders might have noticed that State Auto Financial Corporation (NASDAQ:STFC) filed its quarterly result this time last week. The early response was not positive, with shares down 4.3% to US$12.18 in the past week. State Auto Financial beat revenue expectations by 9.9%, recording sales of US$392m. Statutory earnings per share (EPS) came in at US$0.26, some 7.1% short of analyst estimates. The 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 the analysts have changed their earnings models, following these results.

View our latest analysis for State Auto Financial

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from State Auto Financial's four analysts is for revenues of US$1.50b in 2021, which would reflect a satisfactory 6.6% improvement in sales compared to the last 12 months. State Auto Financial is also expected to turn profitable, with statutory earnings of US$1.60 per share. Before this earnings report, the analysts had been forecasting revenues of US$1.50b and earnings per share (EPS) of US$1.55 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$15.67, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 State Auto Financial, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$13.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. One thing stands out from these estimates, which is that State Auto Financial is forecast to grow faster in the future than it has in the past, with revenues expected to grow 6.6%. If achieved, this would be a much better result than the 0.7% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 5.2% per year. Not only are State Auto Financial's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards State Auto Financial 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$15.67, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple State Auto Financial analysts - going out to 2022, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with State Auto Financial , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.