There's been a major selloff in Big Lots, Inc. (NYSE:BIG) shares in the week since it released its yearly report, with the stock down 38% to US$15.81. Revenues of US$5.3b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$6.16, missing estimates by 2.1%. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Big Lots's seven analysts currently expect revenues in 2021 to be US$5.34b, approximately in line with the last 12 months. Statutory earnings per share are expected to dive 47% to US$3.26 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$5.50b and earnings per share (EPS) of US$4.04 in 2021. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.
It'll come as no surprise then, to learn that analysts have cut their price target 28% to US$20.33. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Big Lots at US$30.00 per share, while the most bearish prices it at US$14.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Big Lots's past performance and to peers in the same market. It's pretty clear that analysts expect Big Lots's revenue growth will slow down substantially, with revenues next year expected to grow 0.3%, compared to a historical growth rate of 0.5% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.2% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Big Lots to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Big Lots. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Big Lots's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Big Lots analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Big Lots's balance sheet, and whether we think Big Lots is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.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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