Analysts' Revenue Estimates For Drax Group plc (LON:DRX) Are Surging Higher

Drax Group plc (LON:DRX) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that Drax Group will make substantially more sales than they'd previously expected.

Following this upgrade, Drax Group's seven analysts are forecasting 2022 revenues to be UK£6.6b, approximately in line with the last 12 months. Per-share earnings are expected to jump 46% to UK£0.77. Before this latest update, the analysts had been forecasting revenues of UK£5.7b and earnings per share (EPS) of UK£0.73 in 2022. Sentiment certainly seems to have improved in recent times, with a nice gain to revenue and a small lift in earnings per share estimates.

See our latest analysis for Drax Group

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£9.11, 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 Drax Group analyst has a price target of UK£11.75 per share, while the most pessimistic values it at UK£5.91. 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. We would highlight that Drax Group's revenue growth is expected to slow, with the forecast 3.0% annualised growth rate until the end of 2022 being well below the historical 8.8% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.7% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Drax Group.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Drax Group.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Drax Group analysts - going out to 2024, and you can see them free on our platform here.

We also provide an overview of the Drax Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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.