Shareholders may have noticed that Bank of California, Inc. (NYSE:BANC) filed its second quarter results this time around last week. The early response was not positive, with shares down 2.4% at US$17.09 last week. It’s an overall credible result, with revenue of $85 million and statutory earnings per share of $0.43, both in line with analysts’ estimates, showing that Banc of California is performing as expected. . Following the result, analysts have updated their earnings model, and it would be good to know if they think there has been a strong change in the company’s outlook, or if business is as it is. habit. We thought readers would find it interesting to see analysts’ latest post-earnings (statutory) forecasts for next year.
Following last week’s earnings report, Banc of California’s six analysts forecast 2022 revenue to be $343.0 million, which is roughly in line with the past 12 months. Earnings per share are expected to rebound 32% to US$2.08. Prior to this earnings report, analysts were forecasting revenue of US$353.6 million and earnings per share (EPS) of US$2.13 in 2022. It’s pretty clear that pessimism kicked in after the latest results, leading to a weaker revenue outlook and a slight drop in earnings per share estimates.
Despite earnings forecast cuts, there has been no real change from the price target of US$23.50, showing that analysts do not believe the changes have a significant impact on its intrinsic value. The consensus price target is only an average of individual analyst targets, so it might be useful to see how wide the range of the underlying estimates is. Banc of California’s most optimistic analyst has a price target of US$27.00 per share, while the most pessimistic puts it at US$20.00. Even so, with a relatively close group of estimates, it appears that analysts are quite confident in their valuations, suggesting that Banc of California is an easy company to predict or that analysts are all using similar assumptions.
One way to get more context on these forecasts is to examine how they compare both to past performance and to the performance of other companies in the same industry. One thing that stands out from these estimates is that the Banc of California is expected to grow faster in the future than in the past, with revenue expected to show annualized growth of 3.1% through the end of 2022. If it is achieved, it would be a much better result than the annual decline of 3.3% recorded over the past five years. Compare that to analyst estimates for the industry as a whole, which suggest that (in total) industry revenue is expected to grow 7.7% annually for the foreseeable future. Although Banc of California’s revenue is expected to improve, it appears analysts are still bearish on the business, predicting slower growth than the overall industry.
The biggest concern is that analysts have cut their earnings-per-share estimates, suggesting headwinds may be coming for Banc of California. Unfortunately, they have also lowered their revenue estimates, and our data indicates that revenue is expected to underperform the industry as a whole. Even so, earnings per share are more important to the intrinsic value of the company. The consensus price target held steady at US$23.50 as the latest estimates were not enough to impact their price targets.
Continuing this thinking, we believe that the company’s long-term outlook is much more relevant than next year’s results. We have estimates – from several analysts at the Banc of California – going out to 2024, and you can see them for free on our platform here.
You should always take note of the risks, for example – Banc of California a 1 warning sign we think you should know.
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