Downgrade: Here's How Analysts See Ithaca Energy plc (LON:ITH) Performing In The Near Term

One thing we could say about the analysts on Ithaca Energy plc (LON:ITH) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the consensus from six analysts covering Ithaca Energy is for revenues of US$1.7b in 2024, implying a disturbing 22% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to tumble 60% to US$0.04 in the same period. Previously, the analysts had been modelling revenues of US$2.1b and earnings per share (EPS) of US$0.17 in 2024. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Ithaca Energy

Analysts made no major changes to their price target of US$1.97, suggesting the downgrades are not expected to have a long-term impact on Ithaca Energy's valuation. 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 Ithaca Energy analyst has a price target of US$2.80 per share, while the most pessimistic values it at US$1.47. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 40% by the end of 2024. This indicates a significant reduction from annual growth of 32% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 0.7% per year. So it's pretty clear that Ithaca Energy's revenues are expected to shrink 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 cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Ithaca Energy.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Ithaca Energy analysts - going out to 2026, and you can see them 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 with high insider ownership.

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