Earnings Beat: Capital Power Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
As you might know, Capital Power Corporation (TSE:CPX) recently reported its full-year numbers. Revenues beat expectations by 22%, and sales of CA$2.0b were sufficient to generate a statutory profit of CA$0.72 - a pleasant surprise given that analysts were forecasting a loss! 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.
View our latest analysis for Capital Power
After the latest results, the consensus from Capital Power's eight analysts is for revenues of CA$1.58b in 2020, which would reflect a not inconsiderable 20% decline in sales compared to the last year of performance. Statutory earnings per share are expected to soar 164% to CA$1.93. In the lead-up to this report, analysts had been modelling revenues of CA$1.62b and earnings per share (EPS) of CA$1.73 in 2020. Although analysts have lowered their sales forecasts, they've also made a substantial gain in their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.
There's been no real change to the average price target of CA$38.55, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. The most optimistic Capital Power analyst has a price target of CA$42.00 per share, while the most pessimistic values it at CA$35.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Capital Power's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 20% revenue decline a notable change from historical growth of 3.6% 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 3.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Capital Power to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Capital Power's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Still, earnings per share are more important to value creation for shareholders. 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Capital Power going out to 2024, and you can see them free on our platform here.
You can also see whether Capital Power is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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