it’s been a good week for Cenovus Energy Inc. (TSE: CVE), as the company just released its latest annual results and shares gained 2.9% to C $ 8.49. This is a moderately negative result overall – revenue fell 2.1% from analysts ‘estimate to C $ 13 billion, and statutory losses were in line with analysts’ expectations, at $ 1.94 CA per share. Following the result, analysts updated their earnings model, and it would be good to know if they think there has been a strong change in the outlook for the company, or if it is like habit. We have put together the most recent statutory forecasts to see if analysts have changed their earnings models as a result of these results.
See our latest analysis for Cenovus Energy
After the latest results, the six analysts covering Cenovus Energy are now forecasting revenues of C $ 31.5 billion in 2021. If achieved, that would reflect a significant 138% improvement in sales from the past 12 months. Profits are expected to improve, and Cenovus Energy expects statutory earnings of C $ 0.12 per share. Prior to this earnings announcement, analysts had modeled revenues of C $ 33.9 billion and losses of C $ 0.19 per share in 2021. While we see a slight decline in the earnings outlook, analysts are now forecasting also that the business will become profitable the next time around. year – earlier than expected – which looks like a pretty sharp increase in expectations.
There has been no actual change to the average price target of CA $ 9.93, the lower revenue and higher profit expectations are not expected to have a significant impact on the company’s valuation at longer term. Sticking to a single price target can be unwise, however, as the consensus target is actually the average of analysts’ price targets. As a result, some investors like to look at the range of estimates to see if there are any differing opinions on the valuation of the company. There are a few variations of perceptions on Cenovus Energy, with the most bullish analyst valuing it at C $ 13.00 and the most bearish at C $ 7.00 per share. This is a fairly wide range of estimates, suggesting that analysts are predicting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they stack up against both past performance and the performance of other companies in the same industry. Analysts expect Cenovus Energy’s growth to accelerate, with forecast growth of 138% ranking favorably against the historic growth of 8.8% per year over the past five years. In contrast, our data suggests that other companies (with analyst coverage) in a similar industry are expected to increase their revenues by 9.8% per year. It seems clear that while the outlook for growth is brighter than in the recent past, analysts also expect Cenovus Energy to grow faster than the industry as a whole.
The bottom line
The most important thing to remember is that analysts now expect Cenovus Energy to become profitable next year, compared to previous expectations that it would report a loss. They also lowered their revenue estimates, although industry data suggests Cenovus Energy’s revenue is expected to grow faster than the industry as a whole. Yet earnings per share are more important for creating shareholder value. The consensus price target held steady at C $ 9.93 as the latest estimates were not sufficient to impact their price targets.
With that in mind, we wouldn’t be too quick to draw a conclusion on Cenovus Energy. Long-term earning power is much more important than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Cenovus Energy through 2022, and you can view them for free on our platform here.
We don’t want to rain too much on the parade, but we also found 3 warning signs for Cenovus Energy (2 are of concern!) That you need to watch out for.
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