Analysts Just Made A Major Revision To Their Neoenergia S.A. (BVMF:NEOE3) Revenue Forecasts

Market forces rained on the parade of Neoenergia S.A. (BVMF:NEOE3) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, the current consensus, from the nine analysts covering Neoenergia, is for revenues of R$42b in 2022, which would reflect a small 6.5% reduction in Neoenergia's sales over the past 12 months. Before the latest update, the analysts were foreseeing R$51b of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on Neoenergia, given the measurable cut to revenue estimates.

Check out our latest analysis for Neoenergia

We'd point out that there was no major changes to their price target of R$26.37, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Neoenergia, with the most bullish analyst valuing it at R$30.00 and the most bearish at R$23.30 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

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. We would highlight that sales are expected to reverse, with a forecast 8.5% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 18% 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 1.4% annually for the foreseeable future. So it's pretty clear that Neoenergia's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting for revenues to shrink at a quicker rate than companies in the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Neoenergia after today.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Neoenergia, including concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk we've identified.

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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.