As you might know, City Holding Company (NASDAQ:CHCO) recently reported its second-quarter numbers. It looks like a credible result overall - although revenues of US$53m were what the analysts expected, City Holding surprised by delivering a (statutory) profit of US$1.12 per share, an impressive 96% above what was forecast. The 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from City Holding's five analysts is for revenues of US$223.3m in 2020, which would reflect a discernible 3.8% decline in sales compared to the last year of performance. Statutory earnings per share are forecast to drop 15% to US$4.81 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$223.7m and earnings per share (EPS) of US$3.90 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the great increase in earnings per share expectations following these results.
The consensus price target was unchanged at US$65.80, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on City Holding, with the most bullish analyst valuing it at US$70.00 and the most bearish at US$61.00 per share. This is a very narrow spread of estimates, implying either that City Holding is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 3.8% revenue decline a notable change from historical growth of 8.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - City Holding is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around City Holding's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that City Holding's revenues 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. We have forecasts for City Holding going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for City Holding that 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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