Challenger Limited (ASX:CGF) shareholders are probably feeling a little disappointed, since its shares fell 6.8% to AU$6.76 in the week after its latest yearly results. Revenues hit AU$3.5b, beating expectations by a remarkable 353%. Statutory earnings per share (EPS) came up short, with EPS of AU$0.33 missing forecasts by 19%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Challenger after the latest results.
Taking into account the latest results, the twelve analysts covering Challenger provided consensus estimates of AU$834.1m revenue in 2023, which would reflect a sizeable 76% decline on its sales over the past 12 months. Statutory earnings per share are forecast to nosedive 52% to AU$0.46 in the same period. Before this earnings report, the analysts had been forecasting revenues of AU$854.2m and earnings per share (EPS) of AU$0.48 in 2023. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
It'll come as no surprise then, to learn that the analysts have cut their price target 6.0% to AU$6.94. 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 Challenger analyst has a price target of AU$8.30 per share, while the most pessimistic values it at AU$6.10. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Challenger shareholders.
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. We would highlight that sales are expected to reverse, with a forecast 76% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 88% over the last year. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.7% per year. So it's pretty clear that Challenger's revenues are expected to shrink faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately they also downgraded their revenue estimates, and our analysts estimates suggest that Challenger is still expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
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. At Simply Wall St, we have a full range of analyst estimates for Challenger going out to 2025, and you can see them free on our platform here..
Even so, be aware that Challenger is showing 1 warning sign in our investment analysis , you should know about...
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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.
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