Results: Northland Power Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Last week saw the newest quarterly earnings release from Northland Power Inc. (TSE:NPI), an important milestone in the company’s journey to build a stronger business. It looks like a credible result overall – although revenues of CA$378m were what analysts expected, Northland Power surprised by delivering a profit of CA$0.41 per share, an impressive 50% above what analysts had forecast. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. With this in mind, we’ve gathered the latest forecasts to see what analysts are expecting for next year.

See our latest analysis for Northland Power

TSX:NPI Past and Future Earnings, November 10th 2019
TSX:NPI Past and Future Earnings, November 10th 2019

After the latest results, the six analysts covering Northland Power are now predicting revenues of CA$2.1b in 2020. If met, this would reflect a major 33% improvement in sales compared to the last 12 months. Earnings per share are expected to climb 10% to CA$1.93. Before this earnings report, analysts had been forecasting revenues of CA$2.1b and earnings per share (EPS) of CA$1.96 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.

Analysts reconfirmed their price target of CA$29.25, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Northland Power analyst has a price target of CA$32.00 per share, while the most pessimistic values it at CA$23.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Northland Power shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the Northland Power’s past performance and to peers in the same market. Analysts are definitely expecting Northland Power’s growth to accelerate, with the forecast 33% growth ranking favourably alongside historical growth of 20% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Northland Power to grow faster than the wider market.

The Bottom Line

The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – and our data does suggest that Northland Power’s revenues are expected to grow faster than the wider market. The consensus price target held steady at CA$29.25, with the latest estimates not enough to have an impact on analysts’ estimated valuations.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Northland Power going out to 2023, and you can see them free on our platform here..

You can also view our analysis of Northland Power’s balance sheet, and whether we think Northland Power is carrying too much debt, for free on our platform here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.