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Zumiez Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Simply Wall St

It's been a pretty great week for Zumiez Inc. (NASDAQ:ZUMZ) shareholders, with its shares surging 13% to US$34.70 in the week since its latest quarterly results. It looks like a credible result overall - although revenues of US$264m were what analysts expected, Zumiez surprised by delivering a profit of US$0.75 per share, an impressive 26% above what analysts had forecast. 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. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.

See our latest analysis for Zumiez

NasdaqGS:ZUMZ Past and Future Earnings, December 10th 2019

Taking into account the latest results, the most recent consensus for Zumiez from seven analysts is for revenues of US$1.06b in 2021, which is a satisfactory 5.1% increase on its sales over the past 12 months. Earnings per share are expected to accumulate 9.0% to US$2.54. Before this earnings report, analysts had been forecasting revenues of US$1.06b and earnings per share (EPS) of US$2.23 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice increase in earnings per share expectations, suggesting that analysts have become more bullish after the latest result.

The consensus price target rose 17% to US$35.14, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. Currently, the most bullish analyst values Zumiez at US$41.00 per share, while the most bearish prices it at US$25.00. 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.

Further, we can compare these estimates to past performance, and see how Zumiez forecasts compare to the wider market's forecast performance. We can infer from the latest estimates that analysts are expecting a continuation of Zumiez's historical trends, as next year's forecast 5.1% revenue growth is roughly in line with 5.5% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 5.9% next year. So although Zumiez is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider market.

The Bottom Line

The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Zumiez following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Zumiez analysts - going out to 2022, and you can see them free on our platform here.

You can also see our analysis of Zumiez's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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