The analysts covering Centerra Gold Inc. (TSE:CG) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the five analysts covering Centerra Gold provided consensus estimates of US$1.1b revenue in 2021, which would reflect a concerning 43% decline on its sales over the past 12 months. Statutory earnings per share are supposed to dive 49% to US$1.14 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.2b and earnings per share (EPS) of US$1.52 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.
Analysts made no major changes to their price target of US$8.51, suggesting the downgrades are not expected to have a long-term impact on Centerra Gold's valuation. 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 Centerra Gold analyst has a price target of US$13.93 per share, while the most pessimistic values it at US$9.23. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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 annualised revenue decline of 68% by the end of 2021. This indicates a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Centerra Gold is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Centerra Gold. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Centerra Gold's revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Centerra Gold after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Centerra Gold going out to 2023, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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