The MEG Energy Corp. (TSE:MEG) Analysts Have Been Trimming Their Sales Forecasts

The analysts covering MEG Energy Corp. (TSE:MEG) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the consensus from MEG Energy's three analysts is for revenues of CA$4.9b in 2024, which would reflect an uneasy 12% decline in sales compared to the last year of performance. Per-share earnings are expected to jump 25% to CA$2.69. Prior to this update, the analysts had been forecasting revenues of CA$5.6b and earnings per share (EPS) of CA$2.76 in 2024. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a small dip in EPS estimates to boot.

See our latest analysis for MEG Energy

Analysts made no major changes to their price target of CA$34.93, suggesting the downgrades are not expected to have a long-term impact on MEG Energy's valuation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 15% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 17% 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 5.6% per year. It's pretty clear that MEG Energy's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on MEG Energy after today.

Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on MEG Energy that suggests the company could be somewhat overvalued. You can learn more about our valuation methodology for 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.