Market forces rained on the parade of Surgery Partners, Inc. (NASDAQ:SGRY) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the four analysts covering Surgery Partners provided consensus estimates of US$1.6b revenue in 2020, which would reflect an uncomfortable 13% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 38% to US$1.41. Yet before this consensus update, the analysts had been forecasting revenues of US$1.9b and losses of US$0.57 per share in 2020. Ergo, there’s been a clear change in sentiment, with the analysts administering a notable cut to this year’s revenue estimates, while at the same time increasing their loss per share forecasts.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 22% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.7% next year. It’s pretty clear that Surgery Partners’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Surgery Partners. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Surgery Partners’ revenues are expected to grow slower than the wider market. Given the serious cut to this year’s outlook, it’s clear that analysts have turned more bearish on Surgery Partners, and we wouldn’t blame shareholders for feeling a little more cautious themselves.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Surgery Partners analysts – going out to 2021, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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