Canadian Tire Corporation, Limited Just Missed EPS By 70%: Here's What Analysts Think Will Happen Next
The analysts might have been a bit too bullish on Canadian Tire Corporation, Limited (TSE:CTC.A), given that the company fell short of expectations when it released its yearly results last week. Results showed a clear earnings miss, with CA$17b revenue coming in 3.0% lower than what the analystsexpected. Statutory earnings per share (EPS) of CA$3.78 missed the mark badly, arriving some 70% below what was expected. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for Canadian Tire Corporation
Taking into account the latest results, Canadian Tire Corporation's nine analysts currently expect revenues in 2024 to be CA$16.8b, approximately in line with the last 12 months. Per-share earnings are expected to bounce 298% to CA$15.26. In the lead-up to this report, the analysts had been modelling revenues of CA$17.6b and earnings per share (EPS) of CA$16.43 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the CA$161 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Canadian Tire Corporation analyst has a price target of CA$195 per share, while the most pessimistic values it at CA$140. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. It's pretty clear that there is an expectation that Canadian Tire Corporation's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 0.8% growth on an annualised basis. This is compared to a historical growth rate of 5.4% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. Factoring in the forecast slowdown in growth, it seems obvious that Canadian Tire Corporation is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Canadian Tire Corporation. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target held steady at CA$161, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Canadian Tire Corporation going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 4 warning signs for Canadian Tire Corporation (1 is significant!) that you should be aware of.
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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.
