It's been a good week for Charter Communications, Inc. (NASDAQ:CHTR) shareholders, because the company has just released its latest first-quarter results, and the shares gained 3.7% to US$516. Statutory earnings per share fell badly short of expectations, coming in at US$1.86, some 29% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$12b. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Charter Communications' 30 analysts is for revenues of US$47.4b in 2020, which would reflect a satisfactory 2.4% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 39% to US$11.68. In the lead-up to this report, the analysts had been modelling revenues of US$47.7b and earnings per share (EPS) of US$12.73 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
The consensus price target held steady at US$553, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Charter Communications analyst has a price target of US$700 per share, while the most pessimistic values it at US$375. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Charter Communications' revenue growth will slow down substantially, with revenues next year expected to grow 2.4%, compared to a historical growth rate of 28% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.2% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Charter Communications.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Charter Communications. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Charter Communications' revenues are expected to 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.
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. At Simply Wall St, we have a full range of analyst estimates for Charter Communications going out to 2024, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 2 warning signs for Charter Communications you should be aware of, and 1 of them is concerning.
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