Canadian Pacific Railway Limited (TSE:CP) Analysts Just Slashed This Year's Revenue Estimates By 17%
The analysts covering Canadian Pacific Railway Limited (TSE:CP) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the most recent consensus for Canadian Pacific Railway from its 23 analysts is for revenues of CA$11b in 2023 which, if met, would be a sizeable 30% increase on its sales over the past 12 months. Statutory earnings per share are presumed to step up 18% to CA$4.47. Previously, the analysts had been modelling revenues of CA$14b and earnings per share (EPS) of CA$4.45 in 2023. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a measurable cut to revenues and reconfirming their earnings per share estimates.
View our latest analysis for Canadian Pacific Railway
The average price target was steady at CA$115 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Canadian Pacific Railway analyst has a price target of CA$126 per share, while the most pessimistic values it at CA$89.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Canadian Pacific Railway's past performance and to peers in the same industry. It's clear from the latest estimates that Canadian Pacific Railway's rate of growth is expected to accelerate meaningfully, with the forecast 30% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 4.2% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Canadian Pacific Railway to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Canadian Pacific Railway going forwards.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on Canadian Pacific Railway's mountain of debt, which could lead to some belt tightening for shareholders. See why we're concerned about Canadian Pacific Railway's balance sheet by visiting our risks dashboard for free on our platform here.
You can also see our analysis of Canadian Pacific Railway's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here