As you might know, Exco Technologies Limited (TSE:XTC) recently reported its annual numbers. Revenues were in line with forecasts, at CA$507m, although earnings per share came in 12% below what analysts expected, at CA$0.65 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
After the latest results, the consensus from Exco Technologies's five analysts is for revenues of CA$496.3m in 2020, which would reflect a perceptible 2.2% decline in sales compared to the last year of performance. Earnings per share are expected to swell 12% to CA$0.84. Yet prior to the latest earnings, analysts had been forecasting revenues of CA$500.6m and earnings per share (EPS) of CA$0.93 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at CA$8.60, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Exco Technologies analyst has a price target of CA$10.00 per share, while the most pessimistic values it at CA$7.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Further, we can compare these estimates to past performance, and see how Exco Technologies forecasts compare to the wider market's forecast performance. We would highlight that sales are expected to reverse, with the forecast 2.2% revenue decline a notable change from historical growth of 4.5% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 11% next year. It's pretty clear that Exco Technologies'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 downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at CA$8.60, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Exco Technologies. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Exco Technologies analysts - going out to 2023, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.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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