As you might know, TransAlta Renewables Inc. (TSE:RNW) last week released its latest quarterly, and things did not turn out so great for shareholders. Results showed a clear earnings miss, with CA$95m revenue coming in 4.7% lower than what the analystsexpected. Statutory earnings per share (EPS) of CA$0.02 missed the mark badly, arriving some 85% below what was expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for TransAlta Renewables from eight analysts is for revenues of CA$473.6m in 2021 which, if met, would be a decent 12% increase on its sales over the past 12 months. Per-share earnings are expected to leap 128% to CA$0.75. In the lead-up to this report, the analysts had been modelling revenues of CA$474.8m and earnings per share (EPS) of CA$0.83 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
The consensus price target held steady at CA$16.58, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic TransAlta Renewables analyst has a price target of CA$18.50 per share, while the most pessimistic values it at CA$9.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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 can infer from the latest estimates that forecasts expect a continuation of TransAlta Renewables'historical trends, as next year's 12% revenue growth is roughly in line with 15% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 8.3% next year. So although TransAlta Renewables is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for TransAlta Renewables. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at CA$16.58, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple TransAlta Renewables analysts - going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for TransAlta Renewables (of which 1 doesn't sit too well with us!) you should know about.
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.
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