Need To Know: The Consensus Just Cut Its RWE Aktiengesellschaft (ETR:RWE) Estimates For 2021

One thing we could say about the analysts on RWE Aktiengesellschaft (ETR:RWE) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the current consensus from RWE's 13 analysts is for revenues of €15b in 2021 which - if met - would reflect a modest 7.4% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 43% to €1.70. Before this latest update, the analysts had been forecasting revenues of €17b and earnings per share (EPS) of €1.84 in 2021. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a minor downgrade to EPS estimates to boot.

See our latest analysis for RWE

Analysts made no major changes to their price target of €39.40, suggesting the downgrades are not expected to have a long-term impact on RWE's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values RWE at €47.00 per share, while the most bearish prices it at €28.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. One thing stands out from these estimates, which is that RWE is forecast to grow faster in the future than it has in the past, with revenues expected to display 7.4% annualised growth until the end of 2021. If achieved, this would be a much better result than the 35% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 2.9% annually. Not only are RWE's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for RWE. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on RWE after today.

There might be good reason for analyst bearishness towards RWE, like dilutive stock issuance over the past year. Learn more, and discover the 3 other flags we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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