JAKKS Pacific, Inc. (NASDAQ:JAKK) just released its latest third-quarter results and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$242m, some 5.3% above estimates, and statutory earnings per share (EPS) coming in at US$4.27, 33% ahead of expectations. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the three analysts covering JAKKS Pacific are now predicting revenues of US$551.3m in 2021. If met, this would reflect an okay 2.1% improvement in sales compared to the last 12 months. JAKKS Pacific is also expected to turn profitable, with statutory earnings of US$0.50 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$544.2m and earnings per share (EPS) of US$0.60 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
Despite cutting their earnings forecasts,the analysts have lifted their price target 5.6% to US$6.33, suggesting that these impacts are not expected to weigh on the stock's value in the long term. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on JAKKS Pacific, with the most bullish analyst valuing it at US$8.00 and the most bearish at US$5.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that JAKKS Pacific is forecast to grow faster in the future than it has in the past, with revenues expected to grow 2.1%. If achieved, this would be a much better result than the 7.5% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 16% next year. So although JAKKS Pacific's revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for JAKKS Pacific. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that JAKKS Pacific's revenues are expected to perform worse 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple JAKKS Pacific analysts - going out to 2021, and you can see them free on our platform here.
It is also worth noting that we have found 4 warning signs for JAKKS Pacific that you need to take into consideration.
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