Earnings Release: Here's Why Analysts Cut Their Culp, Inc. (NYSE:CULP) Price Target To US$8.00

It's been a good week for Culp, Inc. (NYSE:CULP) shareholders, because the company has just released its latest quarterly results, and the shares gained 6.4% to US$5.14. Revenues of US$59m were in line with expectations, although statutory losses per share were US$0.19, some 14% smaller than was expected. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Culp

Following the recent earnings report, the consensus from twin analysts covering Culp is for revenues of US$231.7m in 2024. This implies a measurable 2.3% decline in revenue compared to the last 12 months. Losses are forecast to narrow 2.1% to US$1.07 per share. Before this earnings announcement, the analysts had been modelling revenues of US$238.2m and losses of US$0.72 per share in 2024. So it's pretty clear the analysts have mixed opinions on Culp after this update; revenues were downgraded and per-share losses expected to increase.

The average price target fell 11% to US$8.00, implicitly signalling that lower earnings per share are a leading indicator for Culp's valuation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Culp's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 4.6% to the end of 2024. This tops off a historical decline of 3.2% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.0% annually. So while a broad number of companies are forecast to grow, unfortunately Culp is expected to see its revenue affected worse than other companies in the industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Culp. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. 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 in mind, we wouldn't be too quick to come to a conclusion on Culp. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Culp going out as far as 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Culp you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.