It's been a good week for Essential Utilities, Inc. (NYSE:WTRG) shareholders, because the company has just released its latest third-quarter results, and the shares gained 2.5% to US$42.23. Results look mixed - while revenue fell marginally short of analyst estimates at US$349m, statutory earnings were in line with expectations, at US$1.04 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from Essential Utilities' six analysts is for revenues of US$1.84b in 2021, which would reflect a sizeable 52% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 64% to US$1.66. Before this earnings report, the analysts had been forecasting revenues of US$1.82b and earnings per share (EPS) of US$1.67 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$50.00. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Essential Utilities, with the most bullish analyst valuing it at US$70.00 and the most bearish at US$42.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. It's clear from the latest estimates that Essential Utilities' rate of growth is expected to accelerate meaningfully, with the forecast 52% revenue growth noticeably faster than its historical growth of 5.4%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Essential Utilities to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Essential Utilities. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Essential Utilities analysts - going out to 2022, and you can see them free on our platform here.
Even so, be aware that Essential Utilities is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...
This article by Simply Wall St is general in nature. 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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