News Flash: 5 Analysts Think Spirent Communications plc (LON:SPT) Earnings Are Under Threat

One thing we could say about the analysts on Spirent Communications plc (LON:SPT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Spirent Communications' five analysts is for revenues of US$485m in 2023, which would reflect an uneasy 12% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to tumble 67% to US$0.041 in the same period. Previously, the analysts had been modelling revenues of US$515m and earnings per share (EPS) of US$0.092 in 2023. From this we can that analyst sentiment has definitely become more bearish after the latest update, leading to lower revenue forecasts and a pretty serious decline to earnings per share estimates.

See our latest analysis for Spirent Communications

The consensus price target fell 14% to UK£1.33, with the weaker earnings outlook clearly leading analyst valuation estimates.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 23% by the end of 2023. This indicates a significant reduction from annual growth of 5.5% 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 6.2% per year. It's pretty clear that Spirent Communications' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Spirent Communications' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Spirent Communications.

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 Spirent Communications going out to 2025, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.