McAfee Corp. Just Recorded A 385% EPS Beat: Here's What Analysts Are Forecasting Next
McAfee Corp. (NASDAQ:MCFE) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 7.6% to hit US$467m. McAfee also reported a statutory profit of US$0.21, which was an impressive 385% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for McAfee
Taking into account the latest results, the current consensus, from the seven analysts covering McAfee, is for revenues of US$1.91b in 2021, which would reflect a disturbing 38% reduction in McAfee's sales over the past 12 months. Earnings are expected to improve, with McAfee forecast to report a statutory profit of US$0.62 per share. In the lead-up to this report, the analysts had been modelling revenues of US$2.02b and earnings per share (EPS) of US$0.32 in 2021. Although the analysts have lowered their sales forecasts, they've also made a very substantial lift in their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.
The average price target rose 10% to US$30.67, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values McAfee at US$32.00 per share, while the most bearish prices it at US$28.00. This is a very narrow spread of estimates, implying either that McAfee is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 61% by the end of 2021. This indicates a significant reduction from annual growth of 48% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. It's pretty clear that McAfee's revenues are expected to perform substantially 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 McAfee's earnings potential next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than 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. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for McAfee going out to 2023, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with McAfee (at least 1 which is concerning) , and understanding them should be part of your investment process.
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.
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