Analysts Have Been Trimming Their Landec Corporation (NASDAQ:LNDC) Price Target After Its Latest Report

Last week, you might have seen that Landec Corporation (NASDAQ:LNDC) released its third-quarter result to the market. The early response was not positive, with shares down 7.3% to US$10.73 in the past week. Revenues of US$53m beat expectations by a respectable 9.6%, although statutory losses per share increased. Landec lost US$0.43, which was 2,479% more than what the analysts had included in their models. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Landec after the latest results.

See our latest analysis for Landec

Taking into account the latest results, the five analysts covering Landec provided consensus estimates of US$183.5m revenue in 2023, which would reflect a sizeable 67% decline on its sales over the past 12 months. Landec is also expected to turn profitable, with statutory earnings of US$0.26 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$182.0m and earnings per share (EPS) of US$0.23 in 2023. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the solid gain to earnings per share expectations following these results.

The consensus price target fell 5.7% to US$15.40, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Landec, with the most bullish analyst valuing it at US$20.00 and the most bearish at US$12.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 59% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 3.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.2% annually for the foreseeable future. It's pretty clear that Landec's revenues are expected to perform substantially worse 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 Landec's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues 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 Landec. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Landec analysts - going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Landec that you should be aware of.

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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.