Ovintiv Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Investors in Ovintiv Inc. (NYSE:OVV) had a good week, as its shares rose 6.8% to close at US$49.41 following the release of its full-year results. Revenues were US$11b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$7.90 were also better than expected, beating analyst predictions by 13%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Ovintiv

Taking into account the latest results, Ovintiv's nine analysts currently expect revenues in 2024 to be US$10.7b, approximately in line with the last 12 months. Statutory earnings per share are expected to tumble 36% to US$4.88 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$10.8b and earnings per share (EPS) of US$7.23 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$54.08, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values Ovintiv at US$63.00 per share, while the most bearish prices it at US$42.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

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. We would highlight that Ovintiv's revenue growth is expected to slow, with the forecast 0.1% annualised growth rate until the end of 2024 being well below the historical 19% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 1.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that Ovintiv is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Ovintiv. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Ovintiv's revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Ovintiv analysts - going out to 2026, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Ovintiv that you need to be mindful of.

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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.