Party Time: Brokers Just Made Major Increases To Their BW LPG Limited (OB:BWLPG) Earnings Forecasts

BW LPG Limited (OB:BWLPG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. Investors have been pretty optimistic on BWG too, with the stock up 16% to kr82.35 over the past week. Could this upgrade be enough to drive the stock even higher?

Following the upgrade, the consensus from three analysts covering BWG is for revenues of US$507m in 2023, implying a disturbing 38% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 24% to US$1.14 in the same period. Prior to this update, the analysts had been forecasting revenues of US$454m and earnings per share (EPS) of US$0.57 in 2023. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

View our latest analysis for BWG

Despite these upgrades, the analysts have not made any major changes to their price target of US$10.13, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 BWG, with the most bullish analyst valuing it at US$121 and the most bearish at US$84.42 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. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the BWG's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 32% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 10% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 9.7% per year. The forecasts do look bearish for BWG, since they're expecting it to shrink faster than the industry.

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 next year. Notably, analysts also upgraded their revenue estimates, with sales performing well although BWG's revenue growth is expected to trail that of the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to next year's earnings expectations, it might be time to take another look at BWG.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for BWG going out to 2024, 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 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.