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Earnings Release: Here's Why Analysts Cut Their CVR Energy, Inc. Price Target To US$40.80

·4 min read

CVR Energy, Inc. (NYSE:CVI) came out with its annual results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Revenues of US$6.4b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$3.78, missing estimates by 4.6%. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for CVR Energy

NYSE:CVI Past and Future Earnings, February 22nd 2020
NYSE:CVI Past and Future Earnings, February 22nd 2020

Taking into account the latest results, the current consensus, from the three analysts covering CVR Energy, is for revenues of US$5.89b in 2020, which would reflect a discernible 7.4% reduction in CVR Energy's sales over the past 12 months. Statutory earnings per share are forecast to dive 43% to US$2.15 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$6.12b and earnings per share (EPS) of US$2.39 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a minor downgrade to earnings per share estimates.

The consensus price target fell 5.6% to US$40.80, with the weaker earnings outlook clearly leading analyst valuation estimates. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic CVR Energy analyst has a price target of US$46.00 per share, while the most pessimistic values it at US$37.00. 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 CVR Energy's past performance and to peers in the same market. One thing that stands out from these estimates is that, even though revenues are forecast to keep falling, the decline is expected to accelerate. Analysts have modelled a 7.4% decline next year, compared to a historical decline of 0.2% per annum for the past five years. Compare this with our data on other companies (with analyst coverage) in a similar industry, which in aggregate are forecast to see their revenue decline 4.5% per year. So it looks like CVR Energy is also expected to see its revenues decline at a faster rate 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 CVR Energy. 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for CVR Energy going out to 2022, and you can see them free on our platform here..

You can also see whether CVR Energy 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.