Results: Teradata Corporation Exceeded Expectations And The Consensus Has Updated Its Estimates

There's been a notable change in appetite for Teradata Corporation (NYSE:TDC) shares in the week since its quarterly report, with the stock down 20% to US$25.12. Revenues of US$436m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of US$0.38 an impressive 119% ahead of estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Teradata after the latest results.

See our latest analysis for Teradata

Following the recent earnings report, the consensus from ten analysts covering Teradata is for revenues of US$1.75b in 2024. This implies a noticeable 2.7% decline in revenue compared to the last 12 months. Per-share earnings are expected to soar 52% to US$0.98. Before this earnings report, the analysts had been forecasting revenues of US$1.81b and earnings per share (EPS) of US$0.95 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

The consensus price target fell 22% to US$34.10, with the analysts signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Teradata analyst has a price target of US$50.00 per share, while the most pessimistic values it at US$24.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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 more thing stood out to us about these estimates, and it's the idea that Teradata's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 5.4% to the end of 2024. This tops off a historical decline of 1.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 12% per year. So while a broad number of companies are forecast to grow, unfortunately Teradata is expected to see its revenue affected worse than other companies in 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 Teradata's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. 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.

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 Teradata analysts - going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Teradata 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.