Shareholders of Fly Leasing Limited (NYSE:FLY) will be pleased this week, given that the stock price is up 14% to US$7.17 following its latest third-quarter results. Revenues fell badly short of expectations, with sales of US$60m missing analyst predictions by 23%. Statutory earnings correspondingly nosedived, with Fly Leasing reporting a loss of US$0.26 per share, where the analysts were expecting a profit. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from three analysts covering Fly Leasing is for revenues of US$326.8m in 2021, implying a concerning 20% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to nosedive 51% to US$1.82 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$340.5m and earnings per share (EPS) of US$1.73 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
The analysts have cut their price target 7.3% to US$12.63per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings. 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. There are some variant perceptions on Fly Leasing, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$8.50 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 20%, a significant reduction from annual growth of 5.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.7% next year. It's pretty clear that Fly Leasing's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Fly Leasing's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Fly Leasing going out to 2022, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Fly Leasing (at least 2 which make us uncomfortable) , and understanding these should be part of your investment process.
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This article by Simply Wall St is general in nature. 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.
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