Today is shaping up negative for EDP - Energias de Portugal, S.A. (ELI:EDP) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
After this downgrade, EDP - Energias de Portugal's 19 analysts are now forecasting revenues of €13b in 2021. This would be a credible 6.4% improvement in sales compared to the last 12 months. Per-share earnings are expected to rise 4.7% to €0.22. Before this latest update, the analysts had been forecasting revenues of €15b and earnings per share (EPS) of €0.22 in 2021. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a substantial drop in revenues and some minor tweaks to earnings numbers.
The average price target was steady at €5.71 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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. There are some variant perceptions on EDP - Energias de Portugal, with the most bullish analyst valuing it at €7.15 and the most bearish at €4.60 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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 EDP - Energias de Portugal's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 13% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 3.9% 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 grow 3.4% annually. Not only are EDP - Energias de Portugal's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on EDP - Energias de Portugal after today.
There might be good reason for analyst bearishness towards EDP - Energias de Portugal, like dilutive stock issuance over the past year. Learn more, and discover the 3 other flags we've identified, for 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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