Last week, you might have seen that Ducommun Incorporated (NYSE:DCO) released its third-quarter result to the market. The early response was not positive, with shares down 5.8% to US$32.66 in the past week. Revenues were US$150m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$0.54 were also better than expected, beating analyst predictions by 11%. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Ducommun's four analysts currently expect revenues in 2021 to be US$649.8m, approximately in line with the last 12 months. Per-share earnings are expected to step up 14% to US$2.79. Before this earnings report, the analysts had been forecasting revenues of US$646.7m and earnings per share (EPS) of US$2.52 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 11% to US$46.75, 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 Ducommun at US$54.00 per share, while the most bearish prices it at US$34.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. We would highlight that sales are expected to reverse, with the forecast 1.3% revenue decline a notable change from historical growth of 3.0% 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 5.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ducommun is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Ducommun'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. 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. We have estimates - from multiple Ducommun analysts - going out to 2022, and you can see them free on our platform here.
You still need to take note of risks, for example - Ducommun has 3 warning signs (and 1 which can't be ignored) we think you should know about.
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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