Earnings Update: Meridian Energy Limited (NZSE:MEL) Just Reported Its Interim Results And Analysts Are Updating Their Forecasts

Meridian Energy Limited (NZSE:MEL) came out with its interim results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Meridian Energy reported in line with analyst predictions, delivering revenues of NZ$1.9b and statutory earnings per share of NZ$0.069, suggesting the business is executing well and in line with its plan. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Meridian Energy

Taking into account the latest results, the current consensus from Meridian Energy's five analysts is for revenues of NZ$3.62b in 2021, which would reflect a credible 3.7% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 22% to NZ$0.10. Before this earnings report, the analysts had been forecasting revenues of NZ$3.61b and earnings per share (EPS) of NZ$0.097 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at NZ$5.34, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values Meridian Energy at NZ$8.15 per share, while the most bearish prices it at NZ$3.90. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Meridian Energy's revenue growth is expected to slow, with forecast 3.7% increase next year well below the historical 11%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 Meridian Energy.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Meridian Energy following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Meridian Energy's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Meridian Energy analysts - going out to 2025, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Meridian Energy (1 is potentially serious) you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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