Matrix Service Company (NASDAQ:MTRX) Analysts Just Slashed This Year's Estimates

The analysts covering Matrix Service Company (NASDAQ:MTRX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the two analysts covering Matrix Service provided consensus estimates of US$750m revenue in 2021, which would reflect a noticeable 5.5% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 85% to US$0.10. Before this latest update, the analysts had been forecasting revenues of US$871m and earnings per share (EPS) of US$0.23 in 2021. There looks to have been a major change in sentiment regarding Matrix Service's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.

See our latest analysis for Matrix Service

The consensus price target lifted 6.5% to US$16.50, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Matrix Service, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$16.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Matrix Service is an easy business to forecast or the underlying assumptions are obvious.

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. One more thing stood out to us about these estimates, and it's the idea that Matrix Service'sdecline is expected to accelerate, with revenues forecast to fall 5.5% next year, topping off a historical decline of 3.2% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 6.9% next year. So while a broad number of companies are forecast to grow, unfortunately Matrix Service is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Matrix Service dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2022, which can be seen for 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.

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