Challenger Limited Just Missed Earnings - But Analysts Have Updated Their Models

Shareholders might have noticed that Challenger Limited (ASX:CGF) filed its annual result this time last week. The early response was not positive, with shares down 6.8% to AU$6.76 in the past week. Results were mixed, with sales coming in 353% at AU$3.5b, yet statutory earnings came up 19% short, at AU$0.33 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Challenger

After the latest results, the consensus from Challenger's twelve analysts is for revenues of AU$834.1m in 2023, which would reflect a sizeable 76% decline in sales compared to the last year of performance. Statutory earnings per share are expected to plummet 52% to AU$0.46 in the same period. Before this earnings report, the analysts had been forecasting revenues of AU$854.2m and earnings per share (EPS) of AU$0.48 in 2023. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 6.0% to AU$6.94. 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. The most optimistic Challenger analyst has a price target of AU$8.30 per share, while the most pessimistic values it at AU$6.10. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

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 sales are expected to reverse, with a forecast 76% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 88% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 1.7% annually for the foreseeable future. So it's pretty clear that Challenger's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Challenger. Unfortunately they also downgraded their revenue estimates, and our analysts estimates suggest that Challenger is still expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Challenger's future valuation.

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 Challenger going out to 2025, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for Challenger that we have uncovered.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.