J&J Snack Foods Corp. (NASDAQ:JJSF) just released its quarterly report and things are looking bullish. The company beat forecasts, with revenue of US$360m, some 5.6% above estimates, and statutory earnings per share (EPS) coming in at US$0.69, 33% 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following last week's earnings report, J&J Snack Foods' five analysts are forecasting 2024 revenues to be US$1.59b, approximately in line with the last 12 months. Statutory earnings per share are predicted to step up 11% to US$4.94. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.57b and earnings per share (EPS) of US$4.81 in 2024. So the consensus seems to have become somewhat more optimistic on J&J Snack Foods' earnings potential following these results.
The consensus price target was unchanged at US$182, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic J&J Snack Foods analyst has a price target of US$205 per share, while the most pessimistic values it at US$155. This is a very narrow spread of estimates, implying either that J&J Snack Foods is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. It's pretty clear that there is an expectation that J&J Snack Foods' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 1.0% growth on an annualised basis. This is compared to a historical growth rate of 8.0% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.9% per year. Factoring in the forecast slowdown in growth, it seems obvious that J&J Snack Foods is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around J&J Snack Foods' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$182, 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 J&J Snack Foods. Long-term earnings power is much more important than next year's profits. We have forecasts for J&J Snack Foods going out to 2026, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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