Scales Corporation Limited Just Missed Earnings - But Analysts Have Updated Their Models

Scales Corporation Limited (NZSE:SCL) missed earnings with its latest annual results, disappointing overly-optimistic forecasters. Results showed a clear earnings miss, with NZ$471m revenue coming in 3.4% lower than what the analystsexpected. Statutory earnings per share (EPS) of NZ$0.15 missed the mark badly, arriving some 26% below what was expected. Following the result, the 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Scales

Following last week's earnings report, Scales' dual analysts are forecasting 2021 revenues to be NZ$475.9m, approximately in line with the last 12 months. Per-share earnings are expected to shoot up 40% to NZ$0.21. Before this earnings report, the analysts had been forecasting revenues of NZ$507.7m and earnings per share (EPS) of NZ$0.23 in 2021. The 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 NZ$5.20 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Scales' revenue growth will slow down substantially, with revenues next year expected to grow 1.1%, compared to a historical growth rate of 8.7% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 14% per year. Factoring in the forecast slowdown in growth, it seems obvious that Scales is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the 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 industry. The consensus price target held steady at NZ$5.20, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Scales going out as far as 2023, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Scales that we have uncovered.

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