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The Imperial Oil Limited (TSE:IMO) Analysts Have Been Trimming Their Sales Forecasts

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Market forces rained on the parade of Imperial Oil Limited (TSE:IMO) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, Imperial Oil's five analysts currently expect revenues in 2022 to be CA$38b, approximately in line with the last 12 months. Per-share earnings are expected to jump 97% to CA$7.29. Before this latest update, the analysts had been forecasting revenues of CA$43b and earnings per share (EPS) of CA$7.54 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a small dip in earnings per share numbers as well.

View our latest analysis for Imperial Oil

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

Despite the cuts to forecast earnings, there was no real change to the CA$66.16 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Imperial Oil at CA$81.00 per share, while the most bearish prices it at CA$47.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. It's clear from the latest estimates that Imperial Oil's rate of growth is expected to accelerate meaningfully, with the forecast 1.8% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 1.5% 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 7.7% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Imperial Oil is expected to grow slower than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Imperial Oil. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Imperial Oil going forwards.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Imperial Oil analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading 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.