Bullish: Analysts Just Made A Decent Upgrade To Their RWE Aktiengesellschaft (ETR:RWE) Forecasts

RWE Aktiengesellschaft (ETR:RWE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.

Following the upgrade, the consensus from 15 analysts covering RWE is for revenues of €29b in 2022, implying a definite 10% decline in sales compared to the last 12 months. Per-share earnings are expected to shoot up 50% to €3.05. Before this latest update, the analysts had been forecasting revenues of €22b and earnings per share (EPS) of €2.70 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

View our latest analysis for RWE

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of €50.79, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. The most optimistic RWE analyst has a price target of €60.00 per share, while the most pessimistic values it at €41.00. 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 RWE shareholders.

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 20% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 6.9% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 2.1% per year. The forecasts do look bearish for RWE, since they're expecting it to shrink faster than the industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Notably, analysts also upgraded their revenue estimates, with sales performing well although RWE's revenue growth is expected to trail that of the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at RWE.

Analysts are clearly in love with RWE at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as its declining profit margins. You can learn more, and discover the 3 other warning signs we've identified, for free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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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.