Capital Power Corporation Just Recorded A 14% Revenue Beat: Here's What Analysts Think
Investors in Capital Power Corporation (TSE:CPX) had a good week, as its shares rose 3.0% to close at CA$38.66 following the release of its annual results. It was a mildly positive result, with revenues exceeding expectations at CA$4.3b, while statutory earnings per share (EPS) of CA$6.04 were in line with analyst forecasts. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Capital Power
Following the recent earnings report, the consensus from seven analysts covering Capital Power is for revenues of CA$2.66b in 2024. This implies a stressful 38% decline in revenue compared to the last 12 months. Statutory earnings per share are forecast to tumble 59% to CA$2.38 in the same period. Before this earnings report, the analysts had been forecasting revenues of CA$2.31b and earnings per share (EPS) of CA$2.86 in 2024. Although revenue sentiment has improved substantially, the analysts have made a real cut to per-share earnings estimates, suggesting that the growth is not without cost.
The consensus price target was unchanged at CA$43.91, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. 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. Currently, the most bullish analyst values Capital Power at CA$51.00 per share, while the most bearish prices it at CA$39.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Capital Power is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Capital Power's past performance and to peers in the same industry. We would highlight that revenue is expected to reverse, with a forecast 38% annualised decline to the end of 2024. That is a notable change from historical growth of 23% 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 2.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Capital Power is expected to lag the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Capital Power. They also upgraded their revenue estimates for next year, even though it is expected to grow slower 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.
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 Capital Power analysts - going out to 2025, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 5 warning signs for Capital Power (2 shouldn't be ignored!) that you need to be mindful of.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
