German American Bancorp, Inc. (NASDAQ:GABC) just released its quarterly report and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 2.9% to hit US$50m. Statutory earnings per share (EPS) came in at US$0.47, some 4.0% above whatthe analysts had expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from German American Bancorp’s five analysts is for revenues of US$205.3m in 2020, which would reflect a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are expected to reduce 8.7% to US$1.97 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$194.7m and earnings per share (EPS) of US$1.89 in 2020. It looks like there’s been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
With these upgrades, we’re not surprised to see that the analysts have lifted their price target 5.4% to US$29.50 per share. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on German American Bancorp, with the most bullish analyst valuing it at US$31.00 and the most bearish at US$27.00 per share. This is a very narrow spread of estimates, implying either that German American Bancorp is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
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 can infer from the latest estimates that forecasts expect a continuation of German American Bancorp’shistorical trends, as next year’s 11% revenue growth is roughly in line with 13% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 2.6% per year. So although German American Bancorp is expected to maintain its revenue growth rate, it’s definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards German American Bancorp following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for German American Bancorp going out to 2021, and you can see them free on our platform here.
Don’t forget that there may still be risks. For instance, we’ve identified 2 warning signs for German American Bancorp (1 makes us a bit uncomfortable) you should be aware of.
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