A week ago, Systemax Inc. ( NYSE:SYX ) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. Systemax delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$242m, some 16% above indicated. Statutory EPS were US$0.43, an impressive 115% ahead of forecasts. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the two analysts covering Systemax are now predicting revenues of US$1.01b in 2020. If met, this would reflect a satisfactory 3.5% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to accumulate 6.7% to US$1.68. Before this earnings report, the analysts had been forecasting revenues of US$966.4m and earnings per share (EPS) of US$1.36 in 2020. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a great increase in earnings per share in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 29% to US$36.00per share.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Systemax is forecast to grow faster in the future than it has in the past, with revenues expected to grow 3.5%. If achieved, this would be a much better result than the 7.5% annual decline over the past five years, which includes the impact from the company's strategic decision to exit its IT related business. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.7% per year. Although Systemax's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower 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 Systemax's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Systemax. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Systemax going out as far as 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Systemax that we have uncovered.
When trading Systemax or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers . You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
* Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org .