Need To Know: The Consensus Just Cut Its Primo Water Corporation (TSE:PRMW) Estimates For 2024

The latest analyst coverage could presage a bad day for Primo Water Corporation (TSE:PRMW), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Investors however, have been notably more optimistic about Primo Water recently, with the stock price up a notable 12% to CA$20.20 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the latest downgrade, the current consensus, from the eight analysts covering Primo Water, is for revenues of US$2.1b in 2024, which would reflect a perceptible 8.0% reduction in Primo Water's sales over the past 12 months. Statutory earnings per share are supposed to sink 13% to US$0.64 in the same period. Before this latest update, the analysts had been forecasting revenues of US$2.5b and earnings per share (EPS) of US$0.70 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

View our latest analysis for Primo Water

Despite the cuts to forecast earnings, there was no real change to the US$18.08 price target, showing that the analysts don't think the changes have a meaningful impact on its 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. The most optimistic Primo Water analyst has a price target of US$21.00 per share, while the most pessimistic values it at US$15.15. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. We would highlight that sales are expected to reverse, with a forecast 6.4% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 2.5% 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 2.6% annually for the foreseeable future. It's pretty clear that Primo Water's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Primo Water. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Primo Water going forwards.

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 Primo Water analysts - going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.