Last week, you might have seen that Tabcorp Holdings Limited (ASX:TAH) released its interim result to the market. The early response was not positive, with shares down 8.0% to AU$4.27 in the past week. Tabcorp Holdings beat revenue forecasts by a solid 18% to hit AU$2.9b. Statutory earnings per share fell 12% short of expectations, at AU$0.098. Following the result, 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, Tabcorp Holdings's twelve analysts currently expect revenues in 2020 to be AU$5.57b, approximately in line with the last 12 months. Statutory earnings per share are expected to dip 7.7% to AU$0.17 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of AU$5.57b and earnings per share (EPS) of AU$0.19 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
It might be a surprise to learn that the consensus price target fell 5.2% to AU$4.59, with analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Tabcorp Holdings at AU$5.40 per share, while the most bearish prices it at AU$4.05. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 0.7% revenue decline a notable change from historical growth of 26% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 7.8% annually for the foreseeable future. It's pretty clear that Tabcorp Holdings's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Tabcorp Holdings's future valuation.
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 Tabcorp Holdings analysts - going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Tabcorp Holdings's balance sheet, and whether we think Tabcorp Holdings is carrying too much debt, for free on our platform here.
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