A week ago, Kaman Corporation (NYSE:KAMN) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$172m, some 2.2% above estimates, and statutory earnings per share (EPS) coming in at US$0.29, 73% ahead of expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, Kaman's three analysts are forecasting 2021 revenues to be US$741.6m, approximately in line with the last 12 months. Earnings are expected to improve, with Kaman forecast to report a statutory profit of US$1.77 per share. In the lead-up to this report, the analysts had been modelling revenues of US$738.2m and earnings per share (EPS) of US$1.72 in 2021. So the consensus seems to have become somewhat more optimistic on Kaman's earnings potential following these results.
There's been no major changes to the consensus price target of US$58.00, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Kaman, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$47.00 per share. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2021 compared to the historical decline of 23% 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 see their revenue grow 6.6% per year. So while a broad number of companies are forecast to grow, unfortunately Kaman is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Kaman's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Kaman analysts - going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Kaman that 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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