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APA Corporation (NASDAQ:APA) just released its latest first-quarter results and things are looking bullish. Statutory earnings performance was extremely strong, with revenue of US$2.1b beating expectations by 41% and earnings per share (EPS) of US$1.02, an impressive 48%ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from APA's 18 analysts is for revenues of US$6.24b in 2021, which would reflect a sizeable 26% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 10,705% to US$2.29. Before this earnings report, the analysts had been forecasting revenues of US$5.78b and earnings per share (EPS) of US$2.36 in 2021. So it's pretty clear consensus is mixed on APA after the latest results; whilethe analysts lifted revenue numbers, they also administered a minor downgrade to per-share earnings expectations.
The consensus price target was unchanged at US$23.43, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. 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. There are some variant perceptions on APA, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$11.00 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that APA's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 35% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 0.2% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 4.2% annually. So it looks like APA is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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 APA. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple APA analysts - going out to 2025, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 4 warning signs for APA (of which 1 is a bit concerning!) you should know about.
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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