Lundin Energy AB (publ) (STO:LUNE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that Lundin Energy will make substantially more sales than they'd previously expected.
After the upgrade, the 19 analysts covering Lundin Energy are now predicting revenues of US$4.7b in 2021. If met, this would reflect a sizeable 59% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to drop 11% to US$2.40 in the same period. Previously, the analysts had been modelling revenues of US$4.3b and earnings per share (EPS) of US$2.36 in 2021. There's clearly been a surge in bullishness around the company's sales pipeline, even if there's no real change in earnings per share forecasts.
It may not be a surprise to see that the analysts have reconfirmed their price target of US$37.55, implying that the uplift in sales is not expected to greatly contribute to Lundin Energy's valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Lundin Energy analyst has a price target of US$463 per share, while the most pessimistic values it at US$203. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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 Lundin Energy's past performance and to peers in the same industry. The analysts are definitely expecting Lundin Energy's growth to accelerate, with the forecast 153% annualised growth to the end of 2021 ranking favourably alongside historical growth of 21% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.2% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Lundin Energy is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Lundin Energy.
Analysts are clearly in love with Lundin Energy at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. You can learn more, and discover the 3 other risks we've identified, for free on our platform here.
We also provide an overview of the Lundin Energy Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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