Shareholders in TESSCO Technologies Incorporated (NASDAQ:TESS) had a terrible week, as shares crashed 31% to US$7.65 in the week since its latest third-quarter results. It was a pretty negative result overall, with revenues of US$140m missing analyst predictions by 6.9%. Worse, the business reported a statutory loss of US$0.59 per share, a substantial decline on analyst expectations of a profit. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, TESSCO Technologies's only analyst currently expect revenues in 2021 to be US$564.6m, approximately in line with the last 12 months. Earnings are expected to improve, with TESSCO Technologies forecast to report a statutory profit of US$0.06 per share. In the lead-up to this report, analysts had been modelling revenues of US$587.1m and earnings per share (EPS) of US$0.46 in 2021. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that TESSCO Technologies's revenue growth is expected to slow, with forecast 1.3% increase next year well below the historical 2.4%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 3.4% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect TESSCO Technologies to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that 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 market. There is currently no consensus price target from the analysts we track, but we note that the market disliked the latest results, with the share price falling -31% in the past week.
With that in mind, we wouldn't be too quick to come to a conclusion on TESSCO Technologies. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
You can also view our analysis of TESSCO Technologies's balance sheet, and whether we think TESSCO Technologies is carrying too much debt, for free on our platform here.
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