Investors in Resources Connection, Inc. (NASDAQ:RGP) had a good week, as its shares rose 9.2% to close at US$11.60 following the release of its yearly results. It looks like a credible result overall - although revenues of US$633m were what the analysts expected, Resources Connection surprised by delivering a (statutory) profit of US$0.62 per share, an impressive 71% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Taking into account the latest results, the current consensus, from the four analysts covering Resources Connection, is for revenues of US$612.4m in 2025. This implies a noticeable 3.2% reduction in Resources Connection's revenue over the past 12 months. Statutory earnings per share are forecast to plummet 27% to US$0.46 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$651.8m and earnings per share (EPS) of US$0.62 in 2025. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.

The analysts made no major changes to their price target of US$14.50, suggesting the downgrades are not expected to have a long-term impact on Resources Connection's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Resources Connection analyst has a price target of US$19.00 per share, while the most pessimistic values it at US$11.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Resources Connection's past performance and to peers in the same industry. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 3.2% by the end of 2025. This indicates a significant reduction from annual growth of 1.1% 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 5.5% annually for the foreseeable future. It's pretty clear that Resources Connection's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Resources Connection. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Resources Connection analysts - going out to 2027, and you can see them free on our platform here.

Even so, be aware that Resources Connection is showing 2 warning signs in our investment analysis , you should know about...

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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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