These Analysts Just Made A Noticeable Downgrade To Their Chesapeake Energy Corporation (NASDAQ:CHK) EPS Forecasts

Today is shaping up negative for Chesapeake Energy Corporation (NASDAQ:CHK) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. The stock price has risen 6.6% to US$83.28 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the consensus from Chesapeake Energy's three analysts is for revenues of US$2.8b in 2024, which would reflect a substantial 55% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to crater 86% to US$2.55 in the same period. Before this latest update, the analysts had been forecasting revenues of US$3.3b and earnings per share (EPS) of US$2.96 in 2024. Indeed, we can see that the analysts are a lot more bearish about Chesapeake Energy's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Chesapeake Energy

Despite the cuts to forecast earnings, there was no real change to the US$101 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 55% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 4.4% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.3% annually for the foreseeable future. It's pretty clear that Chesapeake Energy's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Chesapeake Energy's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Chesapeake Energy after the downgrade.

Uncomfortably, our automated valuation tool also suggests that Chesapeake Energy stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. Find out why, and see how we estimate the valuation 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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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.