Revenue Downgrade: Here's What Analysts Forecast For Murphy Oil Corporation (NYSE:MUR)

One thing we could say about the analysts on Murphy Oil Corporation (NYSE:MUR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 5.5% to US$44.45 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After the downgrade, the consensus from Murphy Oil's eight analysts is for revenues of US$3.3b in 2023, which would reflect a substantial 23% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to dip 2.4% to US$6.07 in the same period. Prior to this update, the analysts had been forecasting revenues of US$3.9b and earnings per share (EPS) of US$6.72 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a minor downgrade to EPS estimates to boot.

View our latest analysis for Murphy Oil

Analysts made no major changes to their price target of US$50.69, suggesting the downgrades are not expected to have a long-term impact on Murphy Oil's valuation. 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 Murphy Oil at US$67.00 per share, while the most bearish prices it at US$34.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 23% by the end of 2023. This indicates a significant reduction from annual growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 6.5% annually for the foreseeable future. The forecasts do look bearish for Murphy Oil, since they're expecting it to shrink faster than the industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Murphy Oil. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Murphy Oil going forwards.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Murphy Oil, including recent substantial insider selling. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.