There's been a notable change in appetite for Teradata Corporation (NYSE:TDC) shares in the week since its yearly report, with the stock down 20% to US$38.82. Teradata reported US$1.8b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.61 beat expectations, being 2.7% higher than what the analysts expected. 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.
Taking into account the latest results, Teradata's ten analysts currently expect revenues in 2024 to be US$1.84b, approximately in line with the last 12 months. Per-share earnings are expected to soar 84% to US$1.16. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.91b and earnings per share (EPS) of US$1.28 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The consensus price target fell 12% to US$54.49, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Teradata at US$72.00 per share, while the most bearish prices it at US$43.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's also worth noting that the years of declining revenue look to have come to an end, with the forecast stauing flat to the end of 2024. Historically, Teradata's top line has shrunk approximately 2.7% annually 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 13% per year. So it's pretty clear that, although revenues are improving, Teradata is still expected to grow slower than the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Teradata. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Teradata's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Teradata. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Teradata analysts - going out to 2026, and you can see them free on our platform here.
You can also see whether Teradata is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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