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Chesapeake Energy Corporation (NYSE:CHK): Poised For Long-Term Success?

Simply Wall St

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The latest earnings release Chesapeake Energy Corporation’s (NYSE:CHK) announced in December 2018 suggested that the company faced a minor headwind with earnings declining from US$813m to US$775m, a change of -4.7%. Below is a brief commentary on my key takeaways on how market analysts perceive Chesapeake Energy’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

View our latest analysis for Chesapeake Energy

Analysts’ expectations for the upcoming year seems pessimistic, with earnings falling by -2.7%. But in the following year, there is a complete contrast in performance, with generating double digit 36% compared to today’s level and continues to increase to US$1.1b in 2022.

NYSE:CHK Past and Future Earnings, March 26th 2019

Although it is helpful to be aware of the rate of growth each year relative to today’s level, it may be more valuable estimating the rate at which the earnings are rising or falling on average every year. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Chesapeake Energy’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 12%. This means, we can anticipate Chesapeake Energy will grow its earnings by 12% every year for the next few years.

Next Steps:

For Chesapeake Energy, I’ve put together three important factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Future Earnings: How does CHK’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CHK? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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.

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. Thank you for reading.