Cargojet Inc. (TSE:CJT) came out with its first-quarter results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Revenues came in at CA$123m, in line with estimates, while Cargojet reported a statutory loss of CA$0.12 per share, well short of prior analyst forecasts for a profit. 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.
Taking into account the latest results, the most recent consensus for Cargojet from ten analysts is for revenues of CA$520.3m in 2020 which, if met, would be an okay 4.2% increase on its sales over the past 12 months. Statutory earnings per share are predicted to soar 49% to CA$1.27. In the lead-up to this report, the analysts had been modelling revenues of CA$516.0m and earnings per share (EPS) of CA$1.99 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
Despite cutting their earnings forecasts,the analysts have lifted their price target 12% to CA$141, suggesting that these impacts are not expected to weigh on the stock's value in the long term. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Cargojet, with the most bullish analyst valuing it at CA$165 and the most bearish at CA$120 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Cargojet shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Cargojet's revenue growth will slow down substantially, with revenues next year expected to grow 4.2%, compared to a historical growth rate of 15% 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 6.6% next year. Factoring in the forecast slowdown in growth, it seems obvious that Cargojet 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 Cargojet. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Cargojet going out to 2023, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Cargojet (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.
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