Bearish: Analysts Just Cut Their Southwestern Energy Company (NYSE:SWN) Revenue and EPS estimates

One thing we could say about the analysts on Southwestern Energy Company (NYSE:SWN) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. At US$5.30, shares are up 5.2% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the consensus from twelve analysts covering Southwestern Energy is for revenues of US$8.1b in 2023, implying a stressful 46% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to plummet 44% to US$0.94 in the same period. Previously, the analysts had been modelling revenues of US$11b and earnings per share (EPS) of US$1.46 in 2023. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

View our latest analysis for Southwestern Energy

Despite the cuts to forecast earnings, there was no real change to the US$8.71 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on Southwestern Energy, with the most bullish analyst valuing it at US$14.00 and the most bearish at US$5.00 per share. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 46% by the end of 2023. This indicates a significant reduction from annual growth of 34% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 6.6% per year. The forecasts do look bearish for Southwestern Energy, 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 Southwestern Energy. 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. 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 Southwestern Energy after the downgrade.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on Southwestern Energy's mountain of debt, which could lead to some belt tightening for shareholders. See why we're concerned about Southwestern Energy's balance sheet by visiting our risks dashboard for free on our platform here.

You can also see our analysis of Southwestern Energy's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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