It’s been a mediocre week for Knowles Corporation (NYSE:KN) shareholders, with the stock dropping 18% to US$16.15 in the week since its latest full-year results. It was not a great result overall. While revenues of US$855m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 14% to hit US$0.53 per share. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Knowles’s nine analysts are now forecasting revenues of US$874.4m in 2020. This would be a reasonable 2.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to surge 44% to US$0.79. Yet prior to the latest earnings, analysts had been forecasting revenues of US$905.8m and earnings per share (EPS) of US$0.92 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share forecasts.
It’ll come as no surprise then, to learn that analysts have cut their price target 7.2% to US$21.56. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Knowles analyst has a price target of US$28.00 per share, while the most pessimistic values it at US$17.00. 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 Knowles shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Knowles’s past performance and to peers in the same market. One thing stands out from these estimates, which is that analysts are forecasting Knowles to grow faster in the future than it has in the past, with revenues expected to grow 2.3%. If achieved, this would be a much better result than the 2.8% annual decline 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 5.2% per year. Although Knowles’s revenues are expected to improve, it seems that analysts are still bearish on the business, forecasting it to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Knowles. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Knowles going out to 2021, and you can see them free on our platform here.
You can also see whether Knowles is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.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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