It’s been a mediocre week for Churchill Downs Incorporated (NASDAQ:CHDN) shareholders, with the stock dropping 15% to US$139 in the week since its latest annual results. Churchill Downs reported US$1.3b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$3.38 beat expectations, being 7.7% higher than what analysts expected. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts 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 analysts are expecting for next year.
Taking into account the latest results, the latest consensus from Churchill Downs’s three analysts is for revenues of US$1.42b in 2020, which would reflect a reasonable 6.8% improvement in sales compared to the last 12 months. Statutory per share are forecast to be US$3.49, approximately in line with the last 12 months. In the lead-up to this report, analysts had been modelling revenues of US$1.38b and earnings per share (EPS) of US$3.86 in 2020. Overall it looks as though analysts were a bit mixed on the latest results. Although there was a a reasonable to revenue, the consensus also made a minor downgrade to to its earnings per share forecasts.
Curiously, the consensus price target rose 6.0% to US$160. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. 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 Churchill Downs, with the most bullish analyst valuing it at US$170 and the most bearish at US$141 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to Churchill Downs’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting Churchill Downs’s growth to accelerate, with the forecast 6.8% growth ranking favourably alongside historical growth of 3.7% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.5% per year. So it’s clear that despite the acceleration in growth, Churchill Downs is expected to grow meaningfully slower than the market average.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Churchill Downs. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple Churchill Downs analysts – going out to 2021, and you can see them free on our platform here.
You can also view our analysis of Churchill Downs’s balance sheet, and whether we think Churchill Downs is carrying too much debt, for free on our platform here.
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