Vermilion Energy Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Vermilion Energy Inc. (TSE:VET) investors will be delighted, with the company turning in some strong numbers with its latest results. It was overall a positive result, with revenues beating expectations by 9.4% to hit CA$3.4b. Vermilion Energy also reported a statutory profit of CA$7.80, which was an impressive 43% above what the analysts had forecast. 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.

Check out our latest analysis for Vermilion Energy

Taking into account the latest results, the five analysts covering Vermilion Energy provided consensus estimates of CA$2.71b revenue in 2023, which would reflect a substantial 21% decline on its sales over the past 12 months. Statutory earnings per share are expected to nosedive 49% to CA$4.12 in the same period. In the lead-up to this report, the analysts had been modelling revenues of CA$3.04b and earnings per share (EPS) of CA$6.45 in 2023. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a pretty serious reduction to earnings per share numbers as well.

The consensus price target fell 5.6% to CA$30.89, with the weaker earnings outlook clearly leading valuation estimates. 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 Vermilion Energy at CA$40.50 per share, while the most bearish prices it at CA$23.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 21% annualised revenue decline to the end of 2023. 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. The forecasts do look bearish for Vermilion Energy, since they're expecting it to shrink faster than the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Vermilion Energy. Unfortunately they also cut their revenue estimates for next year, and forecasts imply the business' revenues are expected to perform worse than the wider industry. That said, earnings per share are more important for creating value for shareholders. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Vermilion Energy analysts - going out to 2025, and you can see them free on our platform here.

You still need to take note of risks, for example - Vermilion Energy has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

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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.