These Analysts Just Made An Incredible Downgrade To Their Shenandoah Telecommunications Company (NASDAQ:SHEN) EPS Forecasts

One thing we could say about the analysts on Shenandoah Telecommunications Company (NASDAQ:SHEN) - 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) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the twin analysts covering Shenandoah Telecommunications provided consensus estimates of US$245m revenue in 2021, which would reflect a sizeable 62% decline on its sales over the past 12 months. Statutory earnings per share are supposed to crater 44% to US$0.59 in the same period. Previously, the analysts had been modelling revenues of US$466m and earnings per share (EPS) of US$1.66 in 2021. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Shenandoah Telecommunications

Analysts made no major changes to their price target of US$47.00, suggesting the downgrades are not expected to have a long-term impact on Shenandoah Telecommunications' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Shenandoah Telecommunications at US$53.00 per share, while the most bearish prices it at US$40.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Shenandoah Telecommunications is an easy business to forecast or the underlying assumptions are obvious.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 62%, a significant reduction from annual growth of 8.1% 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 5.2% annually for the foreseeable future. It's pretty clear that Shenandoah Telecommunications' revenues are expected to perform substantially worse than 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 Shenandoah Telecommunications' revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Shenandoah Telecommunications after the downgrade.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

You can also see our analysis of Shenandoah Telecommunications' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you decide to trade Shenandoah Telecommunications, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.