Earnings Beat: Petro Rio S.A. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Petro Rio S.A. (BVMF:PRIO3) just released its latest annual results and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of R$4.4b, some 5.7% above estimates, and statutory earnings per share (EPS) coming in at R$1.60, 30% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Petro Rio

Taking into account the latest results, the most recent consensus for Petro Rio from seven analysts is for revenues of R$5.08b in 2022 which, if met, would be a solid 16% increase on its sales over the past 12 months. Statutory earnings per share are predicted to surge 24% to R$1.98. Yet prior to the latest earnings, the analysts had been anticipated revenues of R$5.32b and earnings per share (EPS) of R$2.01 in 2022. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The consensus has reconfirmed its price target of R$30.63, showing that the analysts don't expect weaker sales expectations next year to have a material impact on Petro Rio'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. Currently, the most bullish analyst values Petro Rio at R$47.00 per share, while the most bearish prices it at R$22.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Petro Rio's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 16% growth on an annualised basis. This is compared to a historical growth rate of 44% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.5% annually. Even after the forecast slowdown in growth, it seems obvious that Petro Rio is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. The consensus price target held steady at R$30.63, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Petro Rio. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Petro Rio analysts - going out to 2024, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Petro Rio you should know about.

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

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.