Earnings Beat: Citi Trends, Inc. (NASDAQ:CTRN) Just Beat Analyst Forecasts, And Analysts Have Been Lifting Their Forecasts

Simply Wall St
·4 min read

It's been a good week for Citi Trends, Inc. (NASDAQ:CTRN) shareholders, because the company has just released its latest yearly results, and the shares gained 8.1% to US$101. Citi Trends reported US$783m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$2.32 beat expectations, being 2.2% higher than what the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Citi Trends after the latest results.

View our latest analysis for Citi Trends

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Taking into account the latest results, the most recent consensus for Citi Trends from three analysts is for revenues of US$962.9m in 2022 which, if met, would be a major 23% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 87% to US$4.37. Before this earnings report, the analysts had been forecasting revenues of US$892.5m and earnings per share (EPS) of US$2.97 in 2022. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a considerable lift to earnings per share in particular.

It will come as no surprise to learn that the analysts have increased their price target for Citi Trends 20% to US$132on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Citi Trends analyst has a price target of US$142 per share, while the most pessimistic values it at US$120. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Citi Trends is an easy business to forecast or the the analysts are all using similar assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Citi Trends' growth to accelerate, with the forecast 23% annualised growth to the end of 2022 ranking favourably alongside historical growth of 2.2% per annum 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 11% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Citi Trends is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Citi Trends' earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Citi Trends going out to 2024, and you can see them free on our platform here..

It is also worth noting that we have found 2 warning signs for Citi Trends that you need to take into consideration.

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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