Last week, you might have seen that Community Bank System, Inc. (NYSE:CBU) released its first-quarter result to the market. The early response was not positive, with shares down 2.8% to US$58.64 in the past week. The result was positive overall - although revenues of US$149m were in line with what the analysts predicted, Community Bank System surprised by delivering a statutory profit of US$0.77 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the seven analysts covering Community Bank System are now predicting revenues of US$599.1m in 2020. If met, this would reflect a modest 2.5% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to plunge 20% to US$2.57 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$609.8m and earnings per share (EPS) of US$2.98 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$62.50, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values Community Bank System at US$70.00 per share, while the most bearish prices it at US$54.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Community Bank System's revenue growth is expected to slow, with forecast 2.5% increase next year well below the historical 11%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.9% next year. So it's pretty clear that, while Community Bank System's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Community Bank System. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Community Bank System analysts - going out to 2021, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for Community Bank System you should know about.
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