Need To Know: Analysts Just Made A Substantial Cut To Their EnQuest PLC (LON:ENQ) Estimates

Market forces rained on the parade of EnQuest PLC (LON:ENQ) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from EnQuest's three analysts is for revenues of US$1.5b in 2022, which would reflect a decent 16% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 26% to US$0.26. Previously, the analysts had been modelling revenues of US$1.7b and earnings per share (EPS) of US$0.32 in 2022. Indeed, we can see that the analysts are a lot more bearish about EnQuest's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for EnQuest

The average price target climbed 12% to US$0.62 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic EnQuest analyst has a price target of US$0.60 per share, while the most pessimistic values it at US$0.42. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that EnQuest's rate of growth is expected to accelerate meaningfully, with the forecast 16% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 8.1% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 2.5% annually. It seems obvious that as part of the brighter growth outlook, EnQuest is expected to grow faster 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. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of EnQuest.

There might be good reason for analyst bearishness towards EnQuest, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other flags we've identified.

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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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.