How Santos' Earnings Drop Will Impact Production Growth and Cash Flow for ASX:STO Investors

• Santos Limited recently reported its half-year earnings for the period ended June 30, 2025, with net income of US$439 million, down from US$636 million a year earlier, and basic earnings per share falling to US$0.135 from US$0.196.
• This indicates a significant year-over-year decrease in both net income and per-share earnings, highlighting shifting profitability trends for the company.
• We'll explore how Santos' recent earnings decline could influence future expectations for its production growth and cash flow sustainability.

We've found 19 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Santos Investment Narrative Recap

To be a Santos shareholder, you need to believe in the company's ability to deliver rising production and cash flows from major projects like Barossa and Pikka while managing regulatory, environmental, and cost risks. The latest sharp drop in half-year net income and earnings per share is a reminder that setbacks, whether from development delays or elevated expenses, can hamper near-term momentum, and highlights the importance of executing on key growth catalysts. However, the recent earnings decline does not appear to materially alter the short-term outlook for Santos' production ramp-up or its anticipated cost savings initiatives, though it does sharpen the focus on maintaining financial flexibility as net debt remains elevated. Among recent events, the ongoing acquisition proposal by the XRG consortium offers another potential turning point for investors, with the Santos board entering exclusive negotiations after receiving a takeover offer in June 2025. While unrelated to the drop in earnings, this development is likely to become central to near-term share price movements, sitting alongside management’s operational priorities and the company’s medium-term growth plans. In contrast, one risk that remains front of mind for investors is Santos’ high net debt and how future development spending could...

Read the full narrative on Santos (it's free!)

Santos' outlook anticipates $6.7 billion in revenue and $1.6 billion in earnings by 2028. This scenario assumes annual revenue growth of 7.4% and a $0.4 billion increase in earnings from the current $1.2 billion.

Uncover how Santos' forecasts yield a A$8.33 fair value, a 7% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members submitted five distinct fair value estimates for Santos, with targets ranging from A$7.96 to A$29.30 per share. As you compare these varied perspectives, keep in mind that successful execution on new projects and future cost containment are likely to be key themes shaping Santos’ performance.

Explore 5 other fair value estimates on Santos - why the stock might be worth just A$7.96!

Build Your Own Santos Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Santos research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Santos research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Santos' overall financial health at a glance.

No Opportunity In Santos?

These stocks are moving-our analysis flagged them today. Act fast before the price catches up:

• Rare earth metals are the new gold rush. Find out which 28 stocks are leading the charge.
• Uncover the next big thing with financially sound penny stocks that balance risk and reward.
• Find companies with promising cash flow potential yet trading below their fair value.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com