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Shareholders might have noticed that VMware, Inc. (NYSE:VMW) filed its third-quarter result this time last week. The early response was not positive, with shares down 4.7% to US$142 in the past week. Revenues were US$2.9b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$1.02, an impressive 60% ahead of estimates. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for VMware from 26 analysts is for revenues of US$12.7b in 2022 which, if met, would be a meaningful 10% increase on its sales over the past 12 months. Statutory earnings per share are forecast to dip 4.1% to US$3.64 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$12.8b and earnings per share (EPS) of US$4.22 in 2022. So there's definitely been a decline in sentiment after the latest results, noting the substantial drop in new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$176, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic VMware analyst has a price target of US$202 per share, while the most pessimistic values it at US$147. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Next year brings more of the same, according to the analysts, with revenue forecast to grow 10%, in line with its 13% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 13% per year. So it's pretty clear that VMware is expected to grow slower than similar companies in the same 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 plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$176, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for VMware going out to 2025, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for VMware you should know about.
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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