Forecast: Analysts Think Equinor ASA's (OB:EQNR) Business Prospects Have Improved Drastically

Equinor ASA ( OB:EQNR ) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The stock price has risen 7.4% to kr268 over the past week, suggesting investors are becoming more optimistic. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

After this upgrade, Equinor's 22 analysts are now forecasting revenues of US$108b in 2022. This would be a substantial 21% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 29% to US$3.42. Before this latest update, the analysts had been forecasting revenues of US$94b and earnings per share (EPS) of US$3.04 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

View our latest analysis for Equinor

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of kr253.01, suggesting that the forecast performance does not have a long term impact on the company'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. Currently, the most bullish analyst values Equinor at kr314 per share, while the most bearish prices it at kr184. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Equinor's rate of growth is expected to accelerate meaningfully, with the forecast 21% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 1.8% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 0.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Equinor to grow faster than the wider industry.

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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster 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 Equinor.

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 Equinor 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.