Yahoo Finance Earnings Beat: Tapestry, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
Investors in Tapestry, Inc. (NYSE:TPR) had a good week, as its shares rose 8.5% to close at US$27.97 following the release of its second-quarter results. Tapestry reported US$1.8b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.08 beat expectations, being 8.5% higher than what analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
View our latest analysis for Tapestry
Following the recent earnings report, the consensus from26 analysts covering Tapestry expects revenues of US$5.88b in 2020, implying a measurable 2.3% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to reduce 4.1% to US$1.97 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$6.11b and earnings per share (EPS) of US$2.30 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$30.98 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. 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 Tapestry at US$48.00 per share, while the most bearish prices it at US$24.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Tapestry's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.3% a significant reduction from annual growth of 8.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 7.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Tapestry to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$30.98, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Tapestry. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Tapestry analysts - going out to 2024, and you can see them free on our platform here.
You can also see whether Tapestry is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned.
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