It's shaping up to be a tough period for Apergy Corporation (NYSE:APY), which a week ago released some disappointing third-quarter results that could have a notable impact on how the market views the stock. Results showed a clear earnings miss, with US$278m revenue coming in 9.2% lower than what analysts expected. Earnings per share (EPS) of US$0.18 missed the mark badly, arriving some 45% below what analysts had expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
After the latest results, the consensus from Apergy's seven analysts is for revenues of US$1.14b in 2020, which would reflect a perceptible 4.9% decline in sales compared to the last year of performance. Earnings per share are expected to step up 11% to US$1.13. Before this earnings report, analysts had been forecasting revenues of US$1.14b and earnings per share (EPS) of US$1.45 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
The average analyst price target fell 8.7% to US$30.50, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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 Apergy at US$36.00 per share, while the most bearish prices it at US$24.50. 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.
Further, we can compare these estimates to past performance, and see how Apergy forecasts compare to the wider market's forecast performance. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.9% a significant reduction from annual growth of 16% over the last three years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.7% next year. It's pretty clear that Apergy's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Apergy. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Apergy's revenues are expected to perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Apergy. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Apergy analysts - going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Apergy's balance sheet, and whether we think Apergy is carrying too much debt, for free on our platform here.
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