The investors in Cerence Inc.'s (NASDAQ:CRNC) will be rubbing their hands together with glee today, after the share price leapt 136% to US$7.20 in the week following its full-year results. The business exceeded expectations with revenue of US$332m coming in 2.2% ahead of forecasts. Statutory losses were US$14.12 a share, in line with what the analysts predicted. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

After the latest results, the consensus from Cerence's seven analysts is for revenues of US$242.6m in 2025, which would reflect a stressful 27% decline in revenue compared to the last year of performance. The loss per share is expected to greatly reduce in the near future, narrowing 95% to US$0.71. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$235.2m and losses of US$0.83 per share in 2025. So it seems there's been a definite increase in optimism about Cerence's future following the latest consensus numbers, with a cut to the loss per share forecasts in particular.

The consensus price target rose 42% to US$7.00, with the analysts encouraged by the higher revenue and lower forecast losses for next year. 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. There are some variant perceptions on Cerence, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$5.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Cerence's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 27% to the end of 2025. This tops off a historical decline of 0.1% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 12% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Cerence to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to perform worse than the wider industry. 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. We have estimates - from multiple Cerence analysts - going out to 2027, and you can see them free on our platform here.

Before you take the next step you should know about the 3 warning signs for Cerence (1 doesn't sit too well with us!) that we have uncovered.

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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.