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Investors in United Fire Group, Inc. (NASDAQ:UFCS) had a good week, as its shares rose 7.4% to close at US$32.50 following the release of its quarterly results. It was a solid earnings report, with revenues and earnings both coming in very strong. Revenues were 11% higher than the analysts had forecast, at US$301m, while the company also delivered a surprise statutory profit, against analyst expectations of a loss. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following the recent earnings report, the consensus from twin analysts covering United Fire Group is for revenues of US$1.06b in 2021, implying a not inconsiderable 11% decline in sales compared to the last 12 months. United Fire Group is also expected to turn profitable, with statutory earnings of US$0.53 per share. Before this earnings report, the analysts had been forecasting revenues of US$1.11b and earnings per share (EPS) of US$0.96 in 2021. From this we can that 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.
Despite the cuts to forecast earnings, there was no real change to the US$36.50 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 14% by the end of 2021. This indicates a significant reduction from annual growth of 2.4% 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 2.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - United Fire Group is expected to lag 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. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for United Fire Group that you need to be mindful of.
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.
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