Need To Know: Analysts Just Made A Substantial Cut To Their PacWest Bancorp (NASDAQ:PACW) Estimates

The analysts covering PacWest Bancorp (NASDAQ:PACW) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. 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 PacWest Bancorp's five analysts is for revenues of US$1.1b in 2023, which would reflect a not inconsiderable 16% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to plunge 51% to US$1.68 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.4b and earnings per share (EPS) of US$3.34 in 2023. Indeed, we can see that the analysts are a lot more bearish about PacWest Bancorp's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for PacWest Bancorp

It'll come as no surprise then, to learn that the analysts have cut their price target 7.0% to US$28.22. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic PacWest Bancorp analyst has a price target of US$33.00 per share, while the most pessimistic values it at US$13.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2023. This indicates a significant reduction from annual growth of 5.5% 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 6.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - PacWest Bancorp is expected to lag 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of PacWest Bancorp.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for PacWest Bancorp going out to 2024, 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.