Ceconomy AG (ETR:CEC) shareholders are probably feeling a little disappointed, since its shares fell 8.9% to €5.07 in the week after its latest quarterly results. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, Ceconomy's eight analysts are forecasting 2021 revenues to be €21.4b, approximately in line with the last 12 months. Ceconomy is also expected to turn profitable, with statutory earnings of €0.34 per share. In the lead-up to this report, the analysts had been modelling revenues of €21.3b and earnings per share (EPS) of €0.37 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at €5.39, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. There are some variant perceptions on Ceconomy, with the most bullish analyst valuing it at €7.30 and the most bearish at €1.75 per share. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Ceconomy's past performance and to peers in the same industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate from the historical decline of 12% per annum over the past five years.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Ceconomy's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Ceconomy going out to 2025, and you can see them free on our platform here.
We also provide an overview of the Ceconomy Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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