Investors in City Holding Company (NASDAQ:CHCO) had a good week, as its shares rose 3.4% to close at US$74.05 following the release of its full-year results. City Holding reported US$227m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$5.55 beat expectations, being 6.0% higher than what the analysts expected. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus from five analysts covering City Holding is for revenues of US$217.4m in 2021, implying a measurable 4.1% decline in sales compared to the last 12 months. Statutory earnings per share are expected to nosedive 22% to US$4.32 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$218.4m and earnings per share (EPS) of US$4.08 in 2021. So the consensus seems to have become somewhat more optimistic on City Holding's earnings potential following these results.
There's been no major changes to the consensus price target of US$72.00, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's 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 City Holding at US$76.00 per share, while the most bearish prices it at US$63.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.1%, a significant reduction from annual growth of 8.1% 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 6.3% next year. It's pretty clear that City Holding's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around City Holding's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that City Holding'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 estimates - from multiple City Holding analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for City Holding (1 is a bit unpleasant!) that you should be aware of.
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City Holding Company operates as a holding company for City National Bank of West Virginia that provides various banking, trust and investment management, and other financial solutions in the United States.
Flawless balance sheet with solid track record and pays a dividend.