Results: National Instruments Corporation Exceeded Expectations And The Consensus Has Updated Its Estimates
National Instruments Corporation (NASDAQ:NATI) shareholders are probably feeling a little disappointed, since its shares fell 3.2% to US$36.49 in the week after its latest first-quarter results. It looks like a credible result overall - although revenues of US$309m were what the analysts expected, National Instruments surprised by delivering a (statutory) profit of US$1.01 per share, an impressive 119% above what was forecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on National Instruments after the latest results.
View our latest analysis for National Instruments
Following the recent earnings report, the consensus from five analysts covering National Instruments is for revenues of US$1.29b in 2020, implying a measurable 4.8% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 23% to US$1.59 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.28b and earnings per share (EPS) of US$1.56 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target rose 5.8% to US$40.20 despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of National Instruments' earnings by assigning a price premium. 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. Currently, the most bullish analyst values National Instruments at US$46.00 per share, while the most bearish prices it at US$30.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the National Instruments' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.8%, a significant reduction from annual growth of 2.5% 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 5.8% next year. It's pretty clear that National Instruments' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will 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. At Simply Wall St, we have a full range of analyst estimates for National Instruments going out to 2022, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with National Instruments (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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