Last week, you might have seen that Teradata Corporation (NYSE:TDC) released its annual result to the market. The early response was not positive, with shares down 2.4% to US$23.41 in the past week. It looks like the results were pretty good overall. While revenues of US$1.9b were in line with analyst predictions, statutory losses were much smaller than expected, with Teradata losing US$0.21 per share. 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.
Following last week’s earnings report, Teradata’s 15 analysts are forecasting 2020 revenues to be US$1.89b, approximately in line with the last 12 months. Earnings are expected to improve, with Teradata forecast to report a statutory profit of US$1.42 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.88b and earnings per share (EPS) of US$0.41 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the great increase in earnings per share expectations following these results.
The consensus price target fell 5.5% to US$26.32, suggesting the increase in earnings forecasts was not enough to offset other analyst concerns. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Teradata analyst has a price target of US$53.00 per share, while the most pessimistic values it at US$19.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. One more thing stood out to us about these estimates, and it’s that Teradata’s decline is expected to slow down, with revenues forecast to fall 0.4% next year, improving on a historical decline of 6.3% a year over the past five years. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 12% next year. So it’s pretty clear that, while it does have declining revenues, at least analysts expect Teradata to suffer less severely than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Teradata’s earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst 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 Teradata’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 Teradata analysts – going out to 2024, 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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