Montauk Renewables, Inc. (NASDAQ:MNTK) Analysts Are More Bearish Than They Used To Be

Today is shaping up negative for Montauk Renewables, Inc. (NASDAQ:MNTK) 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.

Following the downgrade, the consensus from two analysts covering Montauk Renewables is for revenues of US$145m in 2023, implying a painful 25% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to plummet 74% to US$0.06 in the same period. Previously, the analysts had been modelling revenues of US$169m and earnings per share (EPS) of US$0.10 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Montauk Renewables

Analysts made no major changes to their price target of US$6.83, suggesting the downgrades are not expected to have a long-term impact on Montauk Renewables' 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. There are some variant perceptions on Montauk Renewables, with the most bullish analyst valuing it at US$7.50 and the most bearish at US$6.00 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

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 32% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 32% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.5% annually for the foreseeable future. It's pretty clear that Montauk Renewables' revenues are expected to perform substantially worse than the wider 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 Montauk Renewables. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Montauk Renewables' 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 Montauk Renewables after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Montauk Renewables going out as far as 2025, and you can see them free on our platform here.

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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.