Shareholders in Covia Holdings Corporation (NYSE:CVIA) had a terrible week, as shares crashed 28% to US$0.90 in the week since its latest full-year results. Revenues of US$1.6b came in a modest 2.1% below forecasts. Statutory losses were a relative bright spot though, with a per-share loss of US$9.81 coming in a substantial 848% smaller than what analysts had expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we’ve gathered the latest statutory forecasts to see what analysts are expecting for next year.
See our latest analysis for Covia Holdings
After the latest results, the consensus from Covia Holdings’s six analysts is for revenues of US$1.47b in 2020, which would reflect a perceptible 7.7% decline in sales compared to the last year of performance. Per-share statutory losses are expected to explode, reaching US$1.05 per share. Before this earnings announcement, analysts had been forecasting revenues of US$1.51b and losses of US$1.00 per share in 2020. Although analysts have lowered their sales forecasts, they’ve also made a their earnings per share estimates, which implies there’s been something of an uptick in sentiment following the latest results.
The average analyst price target fell 25% to US$1.34, implicitly signalling that lower earnings per share are a leading indicator for Covia Holdings’s valuation. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Covia Holdings analyst has a price target of US$2.00 per share, while the most pessimistic values it at US$0.10. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn’t assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 7.7% revenue decline a notable change from historical growth of 17% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – analysts also expect Covia Holdings to grow slower than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Covia Holdings is moving incrementally towards profitability. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Covia Holdings analysts – going out to 2021, and you can see them free on our platform here.
You can also see whether Covia Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at [email protected] 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. Simply Wall St has no position in the stocks mentioned.
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