One of the biggest stories of last week was how Contura Energy, Inc. (NYSE:CTRA) shares plunged 57% in the week since its latest third-quarter results, closing yesterday at US$9.04. It looks like a pretty bad result, given that revenues fell 10% short of analyst estimates at US$526m, and the company reported a loss of US$3.60 per share instead of the profit that analysts had been forecasting. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on Contura Energy after the latest results.
After the latest results, the consensus from Contura Energy's twin analysts is for revenues of US$1.92b in 2020, which would reflect an uneasy 19% decline in sales compared to the last year of performance. The company is expected to report a loss of US$4.14 in 2020, a sharp decline from a profit over the last year. Before this earnings report, analysts had been forecasting revenues of US$2.22b and earnings per share (EPS) of US$1.90 in 2020. There looks to have been a major change in sentiment regarding Contura Energy's prospects following the latest results, with a real cut to to revenues and analysts now forecasting a loss instead of a profit.
The average analyst price target fell 13% to US$37.00, implicitly signalling that lower earnings per share are a leading indicator for Contura Energy's valuation.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Contura Energy's performance in recent years. These estimates imply that sales are expected to slow, with a forecast revenue decline of 19% a significant reduction from annual growth of 17% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.4% annually for the foreseeable future. It's pretty clear that Contura Energy's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts are expecting Contura Energy to become unprofitable next year. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Contura Energy. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
You can also view our analysis of Contura Energy's balance sheet, and whether we think Contura Energy is carrying too much debt, for free on our platform here.
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