Last week, you might have seen that BP p.l.c. (LON:BP.) released its quarterly result to the market. The early response was not positive, with shares down 4.3% to UK£1.97 in the past week. Revenues fell 3.5% short of expectations, at US$44b. Earnings correspondingly dipped, with BP reporting a statutory loss of US$0.022 per share, whereas the analysts had previously modelled a profit in this period. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from BP's 22 analysts is for revenues of US$213.0b in 2021, which would reflect a credible 3.5% improvement in sales compared to the last 12 months. Earnings are expected to improve, with BP forecast to report a statutory profit of US$0.25 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$220.8b and earnings per share (EPS) of US$0.25 in 2021. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The consensus has reconfirmed its price target of US$4.29, showing that the analysts don't expect weaker sales expectations next year to have a material impact on BP's market value. 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 BP analyst has a price target of US$5.19 per share, while the most pessimistic values it at US$1.47. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that BP's revenue growth is expected to slow, with forecast 3.5% increase next year well below the historical 5.9%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than BP.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Yet - earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 BP going out to 2023, and you can see them free on our platform here..
You still need to take note of risks, for example - BP has 3 warning signs we think you should be aware of.
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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