News Flash: 3 Analysts Think BW Energy Limited (OB:BWE) Earnings Are Under Threat

One thing we could say about the analysts on BW Energy Limited (OB:BWE) - 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. The stock price has risen 5.9% to kr27.70 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

After the downgrade, the three analysts covering BW Energy are now predicting revenues of US$700m in 2023. If met, this would reflect a substantial 218% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 4,889% to US$0.85. Before this latest update, the analysts had been forecasting revenues of US$825m and earnings per share (EPS) of US$0.99 in 2023. Indeed, we can see that the analysts are a lot more bearish about BW Energy's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for BW Energy

Despite the cuts to forecast earnings, there was no real change to the US$4.03 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on BW Energy, with the most bullish analyst valuing it at US$49.59 and the most bearish at US$36.03 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the BW Energy's past performance and to peers in the same industry. The analysts are definitely expecting BW Energy's growth to accelerate, with the forecast 4x annualised growth to the end of 2023 ranking favourably alongside historical growth of 16% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 10% annually. It seems obvious that as part of the brighter growth outlook, BW Energy is expected to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for BW Energy. 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. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on BW Energy after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for BW Energy going out to 2025, 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 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.