Engie Brasil Energia S.A. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

As you might know, Engie Brasil Energia S.A. (BVMF:EGIE3) just kicked off its latest first-quarter results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 3.7% to hit R$2.6b. Engie Brasil Energia also reported a statutory profit of R$2.06, which was an impressive 118% above what the analysts had forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Engie Brasil Energia

After the latest results, the consensus from Engie Brasil Energia's nine analysts is for revenues of R$10.2b in 2024, which would reflect a measurable 2.4% decline in revenue compared to the last year of performance. Statutory earnings per share are expected to dip 5.9% to R$4.88 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of R$10.9b and earnings per share (EPS) of R$4.58 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

The consensus has made no major changes to the price target of R$43.90, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 Engie Brasil Energia at R$50.00 per share, while the most bearish prices it at R$38.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Engie Brasil Energia is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Engie Brasil Energia's past performance and to peers in the same industry. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 3.1% by the end of 2024. This indicates a significant reduction from annual growth of 3.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 0.5% annually for the foreseeable future. So it's pretty clear that Engie Brasil Energia's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Engie Brasil Energia's earnings potential next year. Unfortunately they also cut their revenue estimates for next year. Forecasts imply the business' revenue is expected to perform worse than the wider industry. That said, earnings per share are more important for creating value for shareholders. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Engie Brasil Energia. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Engie Brasil Energia going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Engie Brasil Energia (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

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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.