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Growth Investors: Industry Analysts Just Upgraded Their Devon Energy Corporation (NYSE:DVN) Revenue Forecasts By 19%

·3 min read

Celebrations may be in order for Devon Energy Corporation (NYSE:DVN) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. The stock price has risen 6.8% to US$60.63 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

Following the upgrade, the current consensus from Devon Energy's 16 analysts is for revenues of US$20b in 2022 which - if met - would reflect a decent 13% increase on its sales over the past 12 months. Statutory earnings per share are presumed to swell 11% to US$8.85. Previously, the analysts had been modelling revenues of US$17b and earnings per share (EPS) of US$8.82 in 2022. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.

View our latest analysis for Devon Energy

earnings-and-revenue-growth
earnings-and-revenue-growth

Even though revenue forecasts increased, there was no change to the consensus price target of US$76.39, suggesting the analysts are focused on earnings as the driver of value creation. 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. The most optimistic Devon Energy analyst has a price target of US$115 per share, while the most pessimistic values it at US$48.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. The analysts are definitely expecting Devon Energy's growth to accelerate, with the forecast 27% annualised growth to the end of 2022 ranking favourably alongside historical growth of 9.3% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 5.5% per year. It seems obvious that as part of the brighter growth outlook, Devon Energy is expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Devon Energy.

Analysts are clearly in love with Devon Energy at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. For more information, you can click through to our platform to learn more about this and the 2 other flags we've identified .

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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