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The latest analyst coverage could presage a bad day for Canacol Energy Ltd (TSE:CNE), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the current consensus, from the dual analysts covering Canacol Energy, is for revenues of US$309m in 2023, which would reflect a discernible 3.5% reduction in Canacol Energy's sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 69% to US$1.69 in the same period. Before this latest update, the analysts had been forecasting revenues of US$353m and earnings per share (EPS) of US$1.69 in 2023. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a measurable cut to revenues and some minor tweaks to earnings numbers.
See our latest analysis for Canacol Energy
The consensus price target was reduced 10% to CA$24.00, with the lower revenue forecasts indicating negative sentiment towards Canacol Energy, even though earnings forecasts were unchanged.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 6.9% by the end of 2023. This indicates a significant reduction from annual growth of 11% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Canacol Energy is expected to lag 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, and industry data suggests that Canacol Energy's revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Canacol Energy after today.