Results: California Water Service Group Exceeded Expectations And The Consensus Has Updated Its Estimates

A week ago, California Water Service Group (NYSE:CWT) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 13% higher than the analysts had forecast, at US$244m, while EPS were US$0.70 beating analyst models by 67%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for California Water Service Group

After the latest results, the three analysts covering California Water Service Group are now predicting revenues of US$1.02b in 2024. If met, this would reflect a credible 3.6% improvement in revenue compared to the last 12 months. Statutory per-share earnings are expected to be US$2.98, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$1.00b and earnings per share (EPS) of US$2.81 in 2024. So the consensus seems to have become somewhat more optimistic on California Water Service Group's earnings potential following these results.

There's been no major changes to the consensus price target of US$56.33, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on California Water Service Group, with the most bullish analyst valuing it at US$57.00 and the most bearish at US$55.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting California Water Service Group's growth to accelerate, with the forecast 7.4% annualised growth to the end of 2024 ranking favourably alongside historical growth of 4.4% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 6.8% per year. California Water Service Group is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards California Water Service Group following these results. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall 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 California Water Service Group going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for California Water Service Group that we have uncovered.

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

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.

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