It's been a good week for Carter's, Inc. (NYSE:CRI) shareholders, because the company has just released its latest third-quarter results, and the shares gained 5.0% to US$87.50. The result was positive overall - although revenues of US$865m were in line with what the analysts predicted, Carter's surprised by delivering a statutory profit of US$1.85 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from Carter's' six analysts is for revenues of US$3.40b in 2021, which would reflect a solid 8.3% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 106% to US$6.38. In the lead-up to this report, the analysts had been modelling revenues of US$3.47b and earnings per share (EPS) of US$6.22 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
The consensus has made no major changes to the price target of US$99.43, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Carter's, with the most bullish analyst valuing it at US$105 and the most bearish at US$80.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Carter's is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Carter's' past performance and to peers in the same industry. It's clear from the latest estimates that Carter's' rate of growth is expected to accelerate meaningfully, with the forecast 8.3% revenue growth noticeably faster than its historical growth of 2.3%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 10% per year. So it's clear that despite the acceleration in growth, Carter's is expected to grow meaningfully slower than the industry average.
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 Carter's following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. The consensus price target held steady at US$99.43, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Carter's. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Carter's going out to 2022, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 3 warning signs for Carter's you should be aware of.
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.
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