Analysts Just Shipped A Meaningful Upgrade To Their SSE plc (LON:SSE) Estimates

Celebrations may be in order for SSE plc (LON:SSE) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.

Following the upgrade, the latest consensus from SSE's 15 analysts is for revenues of UK£11b in 2023, which would reflect an okay 3.2% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 77% to UK£1.70. Previously, the analysts had been modelling revenues of UK£9.9b and earnings per share (EPS) of UK£1.60 in 2023. Sentiment certainly seems to have improved in recent times, with a nice increase in revenue and a slight bump in earnings per share estimates.

View our latest analysis for SSE

Despite these upgrades, the analysts have not made any major changes to their price target of UK£20.17, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on SSE, with the most bullish analyst valuing it at UK£22.00 and the most bearish at UK£17.38 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that SSE's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 6.5% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 30% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to decline 0.6% per year. So although SSE is expected to return to growth, it's also expected to grow revenues during a time when the wider industry is estimated to see revenue decline.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at SSE.

Analysts are definitely bullish on SSE, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including its declining profit margins. For more information, you can click through to our platform to learn more about this and the 2 other concerns 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 upgrading 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.