Veritiv Corporation (NYSE:VRTV) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$1.7b, some 9.0% above estimates, and statutory earnings per share (EPS) coming in at US$1.62, 100% ahead of expectations. The analyst 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 estimate suggests is in store for next year.
Following last week's earnings report, Veritiv's one analyst are forecasting 2021 revenues to be US$6.47b, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 2.7% to US$6.55. Before this earnings report, the analyst had been forecasting revenues of US$6.27b and earnings per share (EPS) of US$4.50 in 2021. There's been a pretty noticeable increase in sentiment, with the analyst upgrading revenues and making a great increase in earnings per share in particular.
With these upgrades, we're not surprised to see that the analyst has lifted their price target 36% to US$98.00per share.
Of course, another way to look at these forecasts is to place them into context against the industry itself. From these estimates it looks as though the analyst expects the years of declining sales to come to an end, given the flat revenue forecast out to 2021. That would be a definite improvement, given that the past five years have seen sales shrink 5.7% annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 7.6% per year. So it's pretty clear that, although revenues are improving, Veritiv is still expected to grow slower than the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Veritiv'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. There was also a nice increase in the price target, with the analyst clearly feeling that the intrinsic value of the business is improving.
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.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Veritiv you should be aware of.
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