ConocoPhillips (NYSE:COP) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline. Investor sentiment seems to be improving too, with the share price up 6.3% to US$43.21 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the current consensus from ConocoPhillips' 17 analysts is for revenues of US$31b in 2021 which - if met - would reflect a substantial 60% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$1.58 per share this year. Previously, the analysts had been modelling revenues of US$26b and earnings per share (EPS) of US$1.26 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$54.40, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values ConocoPhillips at US$62.00 per share, while the most bearish prices it at US$46.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
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. The analysts are definitely expecting ConocoPhillips' growth to accelerate, with the forecast 60% growth ranking favourably alongside historical growth of 1.5% 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 11% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that ConocoPhillips is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better 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 ConocoPhillips.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple ConocoPhillips analysts - going out to 2025, and you can see them free on our platform here.
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