Revenue Downgrade: Here's What Analysts Forecast For Aviva plc (LON:AV.)

One thing we could say about the analysts on Aviva plc (LON:AV.) - 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 the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. What's more, Aviva has been out of favour with the market in recent times, so it will be interesting to see if this downgrade is enough to sink the stock even further. Shares are down 8.6% to UK£3.87 over the past 7 days.

After this downgrade, Aviva's eight analysts are now forecasting revenues of UK£36b in 2022. This would be a substantial 104% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 445% to UK£0.37. Before this latest update, the analysts had been forecasting revenues of UK£44b and earnings per share (EPS) of UK£0.40 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

Check out our latest analysis for Aviva

Analysts made no major changes to their price target of UK£4.87, suggesting the downgrades are not expected to have a long-term impact on Aviva's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Aviva analyst has a price target of UK£5.40 per share, while the most pessimistic values it at UK£4.20. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Aviva is an easy business to forecast or the underlying assumptions are obvious.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Aviva is forecast to grow faster in the future than it has in the past, with revenues expected to display 104% annualised growth until the end of 2022. If achieved, this would be a much better result than the 3.0% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 5.4% per year. Not only are Aviva'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 most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Aviva going forwards.

There might be good reason for analyst bearishness towards Aviva, like concerns around earnings quality. For more information, you can click here to discover this and the 2 other risks we've identified.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.