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Celebrations may be in order for Chesapeake Energy Corporation (NASDAQ:CHK) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
Following the latest upgrade, the current consensus, from the seven analysts covering Chesapeake Energy, is for revenues of US$11b in 2022, which would reflect a discernible 4.2% reduction in Chesapeake Energy's sales over the past 12 months. Statutory earnings per share are anticipated to decline 12% to US$11.33 in the same period. Previously, the analysts had been modelling revenues of US$9.4b and earnings per share (EPS) of US$6.14 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$128, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Chesapeake Energy, with the most bullish analyst valuing it at US$179 and the most bearish at US$106 per share. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Chesapeake Energy's past performance and to peers in the same industry. We would also point out that the forecast 8.3% annualised revenue decline to the end of 2022 is roughly in line with the historical trend, which saw revenues shrink 7.3% annually over the past five years By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue shrink 5.6% per year. While this is interesting, Chesapeake Energy's, revenues are still expected to shrink next year, and at a faster rate than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Notably, analysts also upgraded their revenue estimates, with sales performing well although Chesapeake Energy's revenue growth is expected to trail that of the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Chesapeake Energy.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Chesapeake Energy analysts - going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Chesapeake Energy Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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.
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