There's been a notable change in appetite for Navistar International Corporation (NYSE:NAV) shares in the week since its yearly report, with the stock down 10% to US$29.42. It was not a great result overall. While revenues of US$11b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 12% to hit US$2.22 per share. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the eight analysts covering Navistar International provided consensus estimates of US$9.46b revenue in 2020, which would reflect a not inconsiderable 16% decline on its sales over the past 12 months. Statutory earnings per share are expected to expand 14% to US$2.53. Before this earnings report, analysts had been forecasting revenues of US$10.3b and earnings per share (EPS) of US$2.81 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a small dip in earnings per share estimates.
It'll come as no surprise then, to learn that analysts have cut their price target 5.3% to US$32.58. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Navistar International analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$25.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Further, we can compare these estimates to past performance, and see how Navistar International forecasts compare to the wider market's forecast performance. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16% a significant reduction from annual growth of 1.0% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 1.7% next year. It's pretty clear that Navistar International's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Navistar International. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Navistar International's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Navistar International. Long-term earnings power is much more important than next year's profits. We have forecasts for Navistar International going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Navistar International's balance sheet, and whether we think Navistar International is carrying too much debt, for free on our platform here.
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