Churchill Downs Incorporated Beat Analyst Estimates: See What The Consensus Is Forecasting For Next Year
It's been a mediocre week for Churchill Downs Incorporated (NASDAQ:CHDN) shareholders, with the stock dropping 15% to US$139 in the week since its latest annual results. Churchill Downs reported US$1.3b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$3.38 beat expectations, being 7.7% higher than what analysts expected. Following the result, 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.
See our latest analysis for Churchill Downs
After the latest results, the three analysts covering Churchill Downs are now predicting revenues of US$1.42b in 2020. If met, this would reflect a satisfactory 6.8% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$3.49, roughly flat on the last 12 months. Before this earnings report, analysts had been forecasting revenues of US$1.38b and earnings per share (EPS) of US$3.86 in 2020. Overall it looks as though analysts were a bit mixed on the latest results. Although there was a a satisfactory to revenue, the consensus also made a minor downgrade to to its earnings per share forecasts.
Curiously, the consensus price target rose 6.0% to US$160. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. 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 Churchill Downs at US$170 per share, while the most bearish prices it at US$141. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Churchill Downs's past performance and to peers in the same market. It's clear from the latest estimates that Churchill Downs's rate of growth is expected to accelerate meaningfully, with forecast 6.8% revenue growth noticeably faster than its historical growth of 3.7%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 8.5% next year. So it's clear that despite the acceleration in growth, Churchill Downs is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Churchill Downs analysts - going out to 2021, and you can see them free on our platform here.
You can also see whether Churchill Downs is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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