Earnings Miss: The Michaels Companies, Inc. Missed EPS And Analysts Are Revising Their Forecasts
Shareholders will be ecstatic, with their stake up 43% over the past week following The Michaels Companies, Inc.'s (NASDAQ:MIK) latest quarterly results. Revenues fell badly short of expectations, with sales of US$800m missing analyst predictions by 23%. Statutory earnings correspondingly nosedived, with Michaels Companies reporting a loss of US$0.43 per share, where the analysts were expecting a profit. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Check out our latest analysis for Michaels Companies
Following last week's earnings report, Michaels Companies' nine analysts are forecasting 2021 revenues to be US$4.73b, approximately in line with the last 12 months. Statutory earnings per share are expected to plummet 46% to US$0.61 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$4.94b and earnings per share (EPS) of US$1.72 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.
The average price target climbed 24% to US$4.97 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Michaels Companies at US$8.00 per share, while the most bearish prices it at US$1.95. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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 1.0%, a significant reduction from annual growth of 1.1% 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 7.5% annually for the foreseeable future. It's pretty clear that Michaels Companies' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Michaels Companies. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
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 Michaels Companies analysts - going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 4 warning signs for Michaels Companies (1 can't be ignored!) that we have uncovered.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.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. 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. Thank you for reading.
