It's been a pretty great week for Karoon Energy Ltd (ASX:KAR) shareholders, with its shares surging 12% to AU$2.13 in the week since its latest annual results. Revenues of US$385m beat expectations by a respectable 6.6%, although statutory losses per share increased. Karoon Energy lost US$0.12, which was 41% more than what the analysts had included in their models. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the six analysts covering Karoon Energy are now predicting revenues of US$761.1m in 2023. If met, this would reflect a major 98% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Karoon Energy forecast to report a statutory profit of US$0.44 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$787.4m and earnings per share (EPS) of US$0.48 in 2023. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the AU$2.42 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. The most optimistic Karoon Energy analyst has a price target of AU$3.20 per share, while the most pessimistic values it at AU$1.95. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 98% growth on an annualised basis. That is in line with its 87% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 6.5% annually. So although Karoon Energy is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Karoon Energy. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Karoon Energy going out to 2025, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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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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