News Flash: 14 Analysts Think Cathay Pacific Airways Limited (HKG:293) Earnings Are Under Threat

Market forces rained on the parade of Cathay Pacific Airways Limited (HKG:293) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the 14 analysts covering Cathay Pacific Airways, is for revenues of HK$45b in 2021, which would reflect a small 4.3% reduction in Cathay Pacific Airways' sales over the past 12 months. Losses are predicted to fall substantially, shrinking 62% to HK$1.60. However, before this estimates update, the consensus had been expecting revenues of HK$54b and HK$1.29 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Cathay Pacific Airways

The consensus price target was broadly unchanged at HK$7.41, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Cathay Pacific Airways at HK$8.50 per share, while the most bearish prices it at HK$6.00. 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.

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. We would also point out that the forecast 4.3% annualised revenue decline to the end of 2021 is roughly in line with the historical trend, which saw revenues shrink 3.8% annually 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 23% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Cathay Pacific Airways to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Cathay Pacific Airways.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Cathay Pacific Airways analysts - going out to 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.