There’s been a major selloff in Big Lots, Inc. (NYSE:BIG) shares in the week since it released its full-year 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store 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 nosedive 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. 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 Big Lots, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$14.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
In addition, we can look to Big Lots’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider 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. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 4.2% next year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Big Lots.
The Bottom Line
The most important thing to take away is that 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 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 said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Big Lots going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Big Lots’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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