It's been a mediocre week for Teradata Corporation (NYSE:TDC) shareholders, with the stock dropping 20% to US$25.12 in the week since its latest quarterly results. Revenues of US$436m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of US$0.38 an impressive 119% ahead of estimates. 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 the recent earnings report, the consensus from ten analysts covering Teradata is for revenues of US$1.75b in 2024. This implies a measurable 2.7% decline in revenue compared to the last 12 months. Per-share earnings are expected to bounce 52% to US$0.98. Before this earnings report, the analysts had been forecasting revenues of US$1.81b and earnings per share (EPS) of US$0.95 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The consensus price target fell 22% to US$34.10, with the analysts signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Teradata analyst has a price target of US$50.00 per share, while the most pessimistic values 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that Teradata's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 5.4% to the end of 2024. This tops off a historical decline of 1.7% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 12% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Teradata to suffer worse 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 Teradata's earnings potential next year. 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. Yet - earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
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 forecasts for Teradata going out to 2026, and you can see them free on our platform here.
Even so, be aware that Teradata is showing 2 warning signs in our investment analysis , you should know about...
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
