TransAlta Renewables Inc. (TSE:RNW) shares fell 2.3% to CA$17.36 in the week since its latest full-year results. It looks like the results were a bit of a negative overall. While revenues of CA$446m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 5.6% to hit CA$0.68 per share. 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the latest consensus from TransAlta Renewables's five analysts is for revenues of CA$503.5m in 2020, which would reflect a decent 13% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to climb 11% to CA$0.75. Before this earnings report, analysts had been forecasting revenues of CA$484.7m and earnings per share (EPS) of CA$0.78 in 2020. Overall it looks as though analysts were a bit mixed on the latest results. Although there was a a decent to revenue, the consensus also made a minor downgrade to to its earnings per share forecasts.
The consensus price target was unchanged at CA$16.10, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values TransAlta Renewables at CA$17.50 per share, while the most bearish prices it at CA$12.50. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await TransAlta Renewables shareholders.
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. It's pretty clear that analysts expect TransAlta Renewables's revenue growth will slow down substantially, with revenues next year expected to grow 13%, compared to a historical growth rate of 20% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.4% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkTransAlta Renewables will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. The consensus price target held steady at CA$16.10, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple TransAlta Renewables analysts - going out to 2023, and you can see them free on our platform here.
You can also see whether TransAlta Renewables is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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