Today is shaping up negative for Umpqua Holdings Corporation (NASDAQ:UMPQ) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
After this downgrade, Umpqua Holdings' four analysts are now forecasting revenues of US$1.4b in 2022. This would be a decent 14% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to nosedive 29% to US$1.20 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.6b and earnings per share (EPS) of US$1.34 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the US$19.85 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Umpqua Holdings analyst has a price target of US$22.65 per share, while the most pessimistic values it at US$18.47. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Umpqua Holdings' past performance and to peers in the same industry. It's clear from the latest estimates that Umpqua Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 30% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 3.2% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.6% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Umpqua Holdings to grow faster 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 Umpqua Holdings. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Umpqua Holdings after the downgrade.
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 Umpqua Holdings analysts - going out to 2024, and you can see them free on our platform here.
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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.