PacWest Bancorp (NASDAQ:PACW) shares fell 3.5% to US$36.66 in the week since its latest annual results. PacWest Bancorp missed revenue estimates by 2.2%, with sales of US$1.1b, although statutory earnings per share (EPS) of US$3.90 beat expectations, coming in 2.9% ahead of analyst estimates. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the eleven analysts covering PacWest Bancorp, is for revenues of US$1.10b in 2020, which would reflect a noticeable 2.8% reduction in PacWest Bancorp’s sales over the past 12 months. Statutory earnings per share are expected to descend 14% to US$3.36 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$1.13b and earnings per share (EPS) of US$3.46 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the US$39.95 price target, showing that analysts don’t think the changes have a meaningful impact on the stock’s intrinsic value. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values PacWest Bancorp at US$43.00 per share, while the most bearish prices it at US$37.00. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
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. We would highlight that sales are expected to reverse, with the forecast 2.8% revenue decline a notable change from historical growth of 8.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 4.9% annually for the foreseeable future. It’s pretty clear that PacWest Bancorp’s revenues are expected to perform substantially worse than the wider market.
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. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to come to a conclusion on PacWest Bancorp. 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 PacWest Bancorp going out to 2021, and you can see them free on our platform here..
It might also be worth considering whether PacWest Bancorp’s debt load is appropriate, using our debt analysis tools on the Simply Wall St 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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