AMC Networks Inc. Just Missed EPS By 21%: Here's What Analysts Think Will Happen Next

It's been a mediocre week for AMC Networks Inc. (NASDAQ:AMCX) shareholders, with the stock dropping 19% to US$28.30 in the week since its latest full-year results. Statutory earnings per share fell badly short of expectations, coming in at US$6.67, some 21% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$3.1b. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for AMC Networks

After the latest results, the consensus from AMC Networks's 13 analysts is for revenues of US$3.00b in 2020, which would reflect a small 2.1% decline in sales compared to the last year of performance. Statutory earnings per share are expected to increase 8.3% to US$7.33. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.08b and earnings per share (EPS) of US$8.31 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share forecasts.

The consensus price target fell 7.7% to US$44.89, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on AMC Networks, with the most bullish analyst valuing it at US$81.87 and the most bearish at US$28.00 per share. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. We would highlight that sales are expected to reverse, with the forecast 2.1% revenue decline a notable change from historical growth of 5.5% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 3.9% next year. It's pretty clear that AMC Networks's revenues are expected to perform substantially worse than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for AMC Networks. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for AMC Networks going out to 2024, and you can see them free on our platform here.

It might also be worth considering whether AMC Networks's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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