Earnings Beat: Gentherm Incorporated Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Shareholders of Gentherm Incorporated (NASDAQ:THRM) will be pleased this week, given that the stock price is up 11% to US$55.68 following its latest full-year results. Gentherm reported US$1.5b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.22 beat expectations, being 8.4% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Gentherm

Taking into account the latest results, the consensus forecast from Gentherm's five analysts is for revenues of US$1.55b in 2024. This reflects an okay 5.4% improvement in revenue compared to the last 12 months. Per-share earnings are expected to jump 108% to US$2.66. Before this earnings report, the analysts had been forecasting revenues of US$1.56b and earnings per share (EPS) of US$2.54 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target rose 9.8% to US$69.40, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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 Gentherm at US$85.00 per share, while the most bearish prices it at US$63.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. It's pretty clear that there is an expectation that Gentherm's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 5.4% growth on an annualised basis. This is compared to a historical growth rate of 8.1% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that Gentherm is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Gentherm following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they 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. We have estimates - from multiple Gentherm analysts - going out to 2025, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Gentherm that you need to be mindful 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.