Imperial Oil Limited Just Beat EPS By 5.9%: Here's What Analysts Think Will Happen Next

Last week, you might have seen that Imperial Oil Limited (TSE:IMO) released its second-quarter result to the market. The early response was not positive, with shares down 3.3% to CA$95.62 in the past week. Revenue fell 26% shy of analyst expectations, coming in at CA$13b. Statutory earnings per share slightly exceeded forecasts at CA$2.11 but overall it looks like the analystswere a bit over-enthusiastic on revenues. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Imperial Oil

Taking into account the latest results, the six analysts covering Imperial Oil provided consensus estimates of CA$49.7b revenue in 2024, which would reflect a perceptible 5.3% decline over the past 12 months. Statutory earnings per share are expected to reduce 8.2% to CA$9.07 in the same period. Before this earnings report, the analysts had been forecasting revenues of CA$59.0b and earnings per share (EPS) of CA$9.32 in 2024. It looks like sentiment has fallen somewhat in the aftermath of these results, with a real cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

Despite the cuts to forecast earnings, there was no real change to the CA$101 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on Imperial Oil, with the most bullish analyst valuing it at CA$115 and the most bearish at CA$87.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Imperial Oil is an easy business to forecast or the the analysts are all using similar assumptions.

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. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 10% by the end of 2024. This indicates a significant reduction from annual growth of 16% 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 2.7% per year. It's pretty clear that Imperial Oil's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at CA$101, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Imperial Oil analysts - going out to 2026, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Imperial Oil that you need to be mindful of.

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.