Results: Costa Group Holdings Limited Beat Earnings Expectations And Analysts Now Have New Forecasts

As you might know, Costa Group Holdings Limited (ASX:CGC) just kicked off its latest yearly results with some very strong numbers. The company beat both earnings and revenue forecasts, with revenue of AU$1.2b, some 2.9% above estimates, and statutory earnings per share (EPS) coming in at AU$0.15, 24% ahead of expectations. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Costa Group Holdings

Taking into account the latest results, the consensus forecast from Costa Group Holdings' ten analysts is for revenues of AU$1.26b in 2021, which would reflect a meaningful 8.2% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 35% to AU$0.20. Before this earnings report, the analysts had been forecasting revenues of AU$1.24b and earnings per share (EPS) of AU$0.17 in 2021. Although the revenue estimates have not really changed, we can see there's been a substantial gain in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 21% to AU$4.49. 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. There are some variant perceptions on Costa Group Holdings, with the most bullish analyst valuing it at AU$5.36 and the most bearish at AU$3.10 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 8.2%, in line with its 7.2% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 6.5% next year. So although Costa Group Holdings is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Costa Group Holdings' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Costa Group Holdings going out to 2024, and you can see them free on our platform here.

It might also be worth considering whether Costa Group Holdings' debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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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. 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.
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