One thing we could say about the analysts on Teradyne, Inc. (NASDAQ:TER) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the consensus from 20 analysts covering Teradyne is for revenues of US$3.6b in 2022, implying a small 3.9% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to sink 16% to US$5.27 in the same period. Prior to this update, the analysts had been forecasting revenues of US$4.0b and earnings per share (EPS) of US$6.17 in 2022. Indeed, we can see that the analysts are a lot more bearish about Teradyne's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 12% to US$148, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Teradyne, with the most bullish analyst valuing it at US$205 and the most bearish at US$121 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Teradyne shareholders.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.9% by the end of 2022. This indicates a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Teradyne is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Teradyne's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Teradyne.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Teradyne analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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