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Avangrid, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Simply Wall St
·4 min read

Last week, you might have seen that Avangrid, Inc. (NYSE:AGR) released its first-quarter result to the market. The early response was not positive, with shares down 4.3% to US$43.00 in the past week. Avangrid missed revenue estimates by 6.1%, with sales of US$1.8b, although statutory earnings per share (EPS) of US$0.78 beat expectations, coming in 5.4% ahead of analyst estimates. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Avangrid

NYSE:AGR Past and Future Earnings May 1st 2020
NYSE:AGR Past and Future Earnings May 1st 2020

After the latest results, the six analysts covering Avangrid are now predicting revenues of US$6.58b in 2020. If met, this would reflect a reasonable 4.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shrink 9.7% to US$2.11 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$6.62b and earnings per share (EPS) of US$2.10 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The analysts reconfirmed their price target of US$45.50, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Avangrid analyst has a price target of US$47.00 per share, while the most pessimistic values it at US$42.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

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. We would highlight that Avangrid's revenue growth is expected to slow, with forecast 4.6% increase next year well below the historical 8.1%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.0% next year. Even after the forecast slowdown in growth, it seems obvious that Avangrid is also expected 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Avangrid going out to 2024, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 3 warning signs for Avangrid (1 can't be ignored!) that you should be aware of.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.