Things Look Grim For Naturgy Energy Group, S.A. (BME:NTGY) After Today's Downgrade

The latest analyst coverage could presage a bad day for Naturgy Energy Group, S.A. (BME:NTGY), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the 15 analysts covering Naturgy Energy Group, is for revenues of €18b in 2020, which would reflect a chunky 16% reduction in Naturgy Energy Group's sales over the past 12 months. Statutory earnings per share are anticipated to crater 38% to €0.89 in the same period. Before this latest update, the analysts had been forecasting revenues of €21b and earnings per share (EPS) of €1.16 in 2020. Indeed, we can see that the analysts are a lot more bearish about Naturgy Energy Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Naturgy Energy Group

Analysts made no major changes to their price target of €18.49, suggesting the downgrades are not expected to have a long-term impact on Naturgy Energy Group's valuation. 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 Naturgy Energy Group analyst has a price target of €23.00 per share, while the most pessimistic values it at €13.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 1.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 16% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 2.5% next year. So while a broad number of companies are forecast to grow, unfortunately Naturgy Energy Group is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Naturgy Energy Group.

That said, the analysts might have good reason to be negative on Naturgy Energy Group, given the risk of cutting its dividend. Learn more, and discover the 1 other flag we've identified, for free on our platform here.

We also provide an overview of the Naturgy Energy Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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