Bearish: Analysts Just Cut Their Cenovus Energy Inc. (TSE:CVE) Revenue and EPS estimates

The latest analyst coverage could presage a bad day for Cenovus Energy Inc. (TSE:CVE), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the eight analysts covering Cenovus Energy provided consensus estimates of CA$14b revenue in 2020, which would reflect a substantial 30% decline on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of CA$0.25 in 2020, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of CA$16b and earnings per share (EPS) of CA$0.057 in 2020. There looks to have been a major change in sentiment regarding Cenovus Energy’s prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for Cenovus Energy

TSX:CVE Past and Future Earnings, March 24th 2020
TSX:CVE Past and Future Earnings, March 24th 2020

The consensus price target fell 19% to CA$9.01, implicitly signalling that lower earnings per share are a leading indicator for Cenovus Energy’s valuation. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. The most optimistic Cenovus Energy analyst has a price target of CA$16.00 per share, while the most pessimistic values it at CA$3.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 30%, a significant reduction from annual growth of 9.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.3% next year. It’s pretty clear that Cenovus Energy’s revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Cenovus Energy dropped from profits to a loss this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Cenovus Energy’s revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we’d understand if readers now felt a bit wary of Cenovus Energy.

Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Cenovus Energy going out to 2022, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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