As you might know, Community Bank System, Inc. (NYSE:CBU) recently reported its second-quarter numbers. Results were roughly in line with estimates, with revenues of US$145m and statutory earnings per share of US$0.66. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we’ve gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Community Bank System from eight analysts is for revenues of US$597.8m in 2020 which, if met, would be a modest 4.5% increase on its sales over the past 12 months. Statutory earnings per share are forecast to reduce 6.8% to US$2.81 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$605.1m and earnings per share (EPS) of US$2.90 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$62.75, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Community Bank System, with the most bullish analyst valuing it at US$70.00 and the most bearish at US$57.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Community Bank System is an easy business to forecast or the the analysts are all using similar assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Community Bank System’s revenue growth is expected to slow, with forecast 4.5% increase next year well below the historical 11%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 1.9% next year. So it’s pretty clear that, while Community Bank System’s revenue growth is expected to slow, it’s still expected to grow faster than the industry itself.
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. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations – and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$62.75, with the latest estimates not enough to have an impact on their price targets.
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 Community Bank System going out to 2022, and you can see them free on our platform here.
That said, it’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Community Bank System , and understanding these should be part of your investment process.
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