Today is shaping up negative for Shore Bancshares, Inc. (NASDAQ:SHBI) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After this downgrade, Shore Bancshares' three analysts are now forecasting revenues of US$190m in 2024. This would be a substantial 48% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 339% to US$1.49. Prior to this update, the analysts had been forecasting revenues of US$210m and earnings per share (EPS) of US$1.57 in 2024. It's pretty clear that analyst sentiment has fallen after the recent consensus updates, leading to lower revenue forecasts and a minor downgrade to earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 6.3% to US$14.83.

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. The analysts are definitely expecting Shore Bancshares' growth to accelerate, with the forecast 48% annualised growth to the end of 2024 ranking favourably alongside historical growth of 20% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.7% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Shore Bancshares to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Shore Bancshares. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Shore Bancshares' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Shore Bancshares after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Shore Bancshares' business, like major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 3 other warning signs we've identified.

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