Last week, you might have seen that Exponent, Inc. (NASDAQ:EXPO) released its quarterly result to the market. The early response was not positive, with shares down 4.9% to US$67.00 in the past week. Revenues were US$100m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$0.49 were also better than expected, beating analyst predictions by 15%. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following last week's earnings report, Exponent's five analysts are forecasting 2020 revenues to be US$392.4m, approximately in line with the last 12 months. Statutory earnings per share are forecast to drop 10% to US$1.46 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$403.9m and earnings per share (EPS) of US$1.51 in 2020. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$75.00 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on Exponent, with the most bullish analyst valuing it at US$81.00 and the most bearish at US$65.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.3%, a significant reduction from annual growth of 6.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.7% annually for the foreseeable future. It's pretty clear that Exponent's revenues are expected to perform substantially worse than the wider 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 negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$75.00, 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 Exponent. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Exponent going out to 2023, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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