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Shareholders of Core-Mark Holding Company, Inc. (NASDAQ:CORE) will be pleased this week, given that the stock price is up 17% to US$27.10 following its latest annual results. The result was positive overall - although revenues of US$17b were in line with what analysts predicted, Core-Mark Holding Company surprised by delivering a statutory profit of US$1.25 per share, modestly greater than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Core-Mark Holding Company from three analysts is for revenues of US$17.0b in 2020, which is an okay 2.2% increase on its sales over the past 12 months. Statutory per-share earnings are expected to be US$1.26, roughly flat on the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$17.1b and earnings per share (EPS) of US$1.32 in 2020. 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 forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$32.25, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Core-Mark Holding Company at US$35.00 per share, while the most bearish prices it at US$30.00. 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect Core-Mark Holding Company's revenue growth will slow down substantially, with revenues next year expected to grow 2.2%, compared to a historical growth rate of 12% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 2.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Core-Mark Holding Company to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Core-Mark Holding Company. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Core-Mark Holding Company going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Core-Mark Holding Company's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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