Compañía Cervecerías Unidas S.A. (SNSE:CCU) shareholders are probably feeling a little disappointed, since its shares fell 2.8% to CL$5,832 in the week after its latest first-quarter results. Statutory earnings per share of CL$87.20 unfortunately missed expectations by 14%, although it was encouraging to see revenues of CL$511b exceed expectations by 2.9%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. 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 current consensus, from the six analysts covering Compañía Cervecerías Unidas, is for revenues of CL$1.81t in 2020, which would reflect a measurable 2.4% reduction in Compañía Cervecerías Unidas’ sales over the past 12 months. Statutory earnings per share are predicted to grow 10% to CL$339. In the lead-up to this report, the analysts had been modelling revenues of CL$1.81t and earnings per share (EPS) of CL$343 in 2020. So it’s pretty clear that, although the analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of CL$7,151, showing that the business is executing well and in line with expectations. 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. Currently, the most bullish analyst values Compañía Cervecerías Unidas at CL$10,400 per share, while the most bearish prices it at CL$5,000. 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 2.4%, a significant reduction from annual growth of 5.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.7% annually for the foreseeable future. It’s pretty clear that Compañía Cervecerías Unidas’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Compañía Cervecerías Unidas’ revenues are expected to perform worse than the wider industry. The consensus price target held steady at CL$7,151, with the latest estimates not enough to have an impact on their price targets.
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 forecasts for Compañía Cervecerías Unidas going out to 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Compañía Cervecerías Unidas that we have uncovered.
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