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Western Alliance Bancorporation Just Recorded A 33% EPS Beat: Here's What Analysts Are Forecasting Next

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Western Alliance Bancorporation (NYSE:WAL) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$316m, some 3.4% above estimates, and statutory earnings per share (EPS) coming in at US$0.93, 33% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Western Alliance Bancorporation after the latest results.

See our latest analysis for Western Alliance Bancorporation

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Taking into account the latest results, the current consensus from Western Alliance Bancorporation's eight analysts is for revenues of US$1.23b in 2020, which would reflect a huge 21% increase on its sales over the past 12 months. Statutory earnings per share are forecast to descend 14% to US$3.68 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.23b and earnings per share (EPS) of US$3.56 in 2020. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$41.00, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Western Alliance Bancorporation analyst has a price target of US$47.00 per share, while the most pessimistic values it at US$33.00. 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.

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. The analysts are definitely expecting Western Alliance Bancorporation's growth to accelerate, with the forecast 21% growth ranking favourably alongside historical growth of 16% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Western Alliance Bancorporation to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Western Alliance Bancorporation's earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$41.00, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Western Alliance Bancorporation. Long-term earnings power is much more important than next year's profits. We have forecasts for Western Alliance Bancorporation going out to 2022, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Western Alliance Bancorporation 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.

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

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