It’s been a good week for Cincinnati Bell Inc. (NYSE:CBB) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.4% to US$5.41. It looks like the results were pretty good overall. While revenues of US$383m were in line with analyst predictions, losses were much smaller than expected, with Cincinnati Bell losing US$0.32 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see analysts’ latest post-earnings forecasts for next year.
Taking into account the latest results, Cincinnati Bell’s five analysts currently expect revenues in 2020 to be US$1.5b, approximately in line with the last 12 months. Losses are forecast to balloon 60% to US$0.68 per share. Before this latest report, the consensus had been expecting revenues of US$1.5b and US$0.66 per share in losses. Although the revenue estimates have not really changed, we can see there’s been a earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
As a result, there was no major change to the consensus price target of US$6.65, with analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Cincinnati Bell at US$8.00 per share, while the most bearish prices it at US$4.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.6% a significant reduction from annual growth of 5.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 1.0% annually for the foreseeable future. It’s pretty clear that Cincinnati Bell’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most obvious conclusion is that analysts made no changes to their forecasts for a loss next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues expected to perform worse than the wider market. The consensus price target held steady at US$6.65, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Cincinnati Bell analysts – going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Cincinnati Bell’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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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. Thank you for reading.