Newsflash: NRG Energy, Inc. (NYSE:NRG) Analysts Have Been Trimming Their Revenue Forecasts

Today is shaping up negative for NRG Energy, Inc. (NYSE:NRG) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the consensus from NRG Energy's seven analysts is for revenues of US$19b in 2022, which would reflect a concerning 29% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to nosedive 60% to US$3.62 in the same period. Prior to this update, the analysts had been forecasting revenues of US$21b and earnings per share (EPS) of US$3.69 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a small dip in EPS estimates to boot.

View our latest analysis for NRG Energy

Analysts made no major changes to their price target of US$43.91, suggesting the downgrades are not expected to have a long-term impact on NRG Energy's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic NRG Energy analyst has a price target of US$52.00 per share, while the most pessimistic values it at US$36.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. We would highlight that sales are expected to reverse, with a forecast 29% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 18% 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 2.6% 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 analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that NRG Energy's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of NRG Energy going forwards.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with NRG Energy, including concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk we've identified.

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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.