Industry Analysts Just Made A Stunning Upgrade To Their NRG Energy, Inc. (NYSE:NRG) Revenue Forecasts

NRG Energy, Inc. (NYSE:NRG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. The market seems to be pricing in some improvement in the business too, with the stock up 7.7% over the past week, closing at US$33.19. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the latest upgrade, the three analysts covering NRG Energy provided consensus estimates of US$18b revenue in 2023, which would reflect a stressful 42% decline on its sales over the past 12 months. Per-share earnings are expected to soar 65% to US$8.67. Prior to this update, the analysts had been forecasting revenues of US$13b and earnings per share (EPS) of US$8.53 in 2023. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.

See our latest analysis for NRG Energy

Even though revenue forecasts increased, there was no change to the consensus price target of US$39.67, suggesting the analysts are focused on earnings as the driver of value creation. 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. There are some variant perceptions on NRG Energy, with the most bullish analyst valuing it at US$52.00 and the most bearish at US$30.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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 42% by the end of 2023. This indicates a significant reduction from annual growth of 31% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - NRG Energy is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at NRG Energy.

Analysts are definitely bullish on NRG Energy, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including its declining profit margins. You can learn more, and discover the 2 other flags 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.