Analysts Have Just Cut Their Cathay Pacific Airways Limited (HKG:293) Revenue Estimates By 14%

One thing we could say about the analysts on Cathay Pacific Airways Limited (HKG:293) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the current consensus from Cathay Pacific Airways' twelve analysts is for revenues of HK$38b in 2021 which - if met - would reflect a satisfactory 7.3% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 42% to HK$1.86. Yet prior to the latest estimates, the analysts had been forecasting revenues of HK$44b and losses of HK$1.68 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for Cathay Pacific Airways

The consensus price target fell 5.5% to HK$7.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Cathay Pacific Airways, with the most bullish analyst valuing it at HK$8.40 and the most bearish at HK$5.80 per share. 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 Cathay Pacific Airways shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Cathay Pacific Airways' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 15% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 9.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 24% per year. Although Cathay Pacific Airways' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Cathay Pacific Airways. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Cathay Pacific Airways after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Cathay Pacific Airways going out to 2023, and you can see them free on our platform here.

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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.
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