Shareholders of Community Health Systems, Inc. (NYSE:CYH) will be pleased this week, given that the stock price is up 13% to US$4.50 following its latest quarterly results. Although revenues of US$2.5b were in line with analyst expectations, Community Health Systems surprised on the earnings front, with an unexpected (statutory) profit of US$0.61 per share a nice improvement on the losses that the analystsforecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Community Health Systems after the latest results.
Taking into account the latest results, the eight analysts covering Community Health Systems provided consensus estimates of US$11.6b revenue in 2020, which would reflect a discernible 3.9% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 96% to US$0.11. Before this latest report, the consensus had been expecting revenues of US$11.4b and US$6.05 per share in losses. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a loss per share in particular.
There was no major change to the consensus price target of US$3.64, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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. The most optimistic Community Health Systems analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$2.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. We would also point out that the forecast 3.9% revenue decline is better than the historical trend, which saw revenues shrink 10% annually over the past five years
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Community Health Systems going out to 2022, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Community Health Systems (1 shouldn't be ignored) you should be aware of.
This article by Simply Wall St is general in nature. 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.
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