Today is shaping up negative for Cambridge Bancorp (NASDAQ:CATC) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 6.9% to US$63.71 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the latest downgrade, the solo analyst covering Cambridge Bancorp provided consensus estimates of US$110m revenue in 2024, which would reflect a concerning 28% decline on its sales over the past 12 months. Statutory earnings per share are presumed to climb 15% to US$4.19. Before this latest update, the analyst had been forecasting revenues of US$140m and earnings per share (EPS) of US$4.43 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a pretty serious reduction to revenue estimates and a minor downgrade to earnings per share numbers as well.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 36% by the end of 2024. This indicates a significant reduction from annual growth of 11% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Cambridge Bancorp is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Cambridge Bancorp. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Cambridge Bancorp's revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Cambridge Bancorp after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2025, which can be seen for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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