Some Analysts Just Cut Their Birchcliff Energy Ltd. (TSE:BIR) Estimates

The latest analyst coverage could presage a bad day for Birchcliff Energy Ltd. (TSE:BIR), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from three analysts covering Birchcliff Energy is for revenues of CA$764m in 2023, implying a concerning 37% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to tumble 85% to CA$0.28 in the same period. Previously, the analysts had been modelling revenues of CA$906m and earnings per share (EPS) of CA$0.49 in 2023. Indeed, we can see that the analysts are a lot more bearish about Birchcliff Energy's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Birchcliff Energy

Despite the cuts to forecast earnings, there was no real change to the CA$10.10 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic 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 Birchcliff Energy at CA$16.00 per share, while the most bearish prices it at CA$7.50. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 46% by the end of 2023. This indicates a significant reduction from annual growth of 20% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.7% annually for the foreseeable future. It's pretty clear that Birchcliff Energy's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Birchcliff Energy. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Birchcliff Energy going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Birchcliff Energy analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.