Results: Preferred Bank Beat Earnings Expectations And Analysts Now Have New Forecasts – Yahoo Finance

A week ago, Preferred Bank (NASDAQ:PFBC) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. Preferred Bank beat earnings, with revenues hitting US$43m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 12%. 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 Preferred Bank after the latest results.

Check out our latest analysis for Preferred Bank

Taking into account the latest results, the consensus forecast from Preferred Bank’s five analysts is for revenues of US$176.1m in 2020, which would reflect a satisfactory 7.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to drop 15% to US$4.27 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$157.7m and earnings per share (EPS) of US$3.96 in 2020. Sentiment certainly seems to have improved after the latest results, with a substantial gain in revenue and a slight bump in earnings per share estimates.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$39.00, suggesting that the forecast performance does not have a long term impact on the company’s valuation. 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. There are some variant perceptions on Preferred Bank, with the most bullish analyst valuing it at US$42.00 and the most bearish at US$36.00 per share. This is a very narrow spread of estimates, implying either that Preferred Bank is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Preferred Bank’s past performance and to peers in the same industry. We would highlight that Preferred Bank’s revenue growth is expected to slow, with forecast 7.0% increase next year well below the historical 17%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.9% next year. Even after the forecast slowdown in growth, it seems obvious that Preferred Bank is also expected to grow faster than 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 Preferred Bank’s earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at US$39.00, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn’t be too quick to come to a conclusion on Preferred Bank. Long-term earnings power is much more important than next year’s profits. We have forecasts for Preferred Bank going out to 2021, and you can see them free on our platform here.