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Need To Know: Analysts Just Made A Substantial Cut To Their Cairn Energy PLC (LON:CNE) Estimates

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Simply Wall St
·3 min read
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The latest analyst coverage could presage a bad day for Cairn Energy PLC (LON:CNE), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, the seven analysts covering Cairn Energy provided consensus estimates of US$253m revenue in 2021, which would reflect a disturbing 36% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$346m of revenue in 2021. It looks like forecasts have become a fair bit less optimistic on Cairn Energy, given the pretty serious reduction to revenue estimates.

View our latest analysis for Cairn Energy

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We'd point out that there was no major changes to their price target of US$3.05, suggesting the latest estimates were not enough to shift their view on the value of the business. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Cairn Energy analyst has a price target of US$3.13 per share, while the most pessimistic values it at US$1.47. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 36% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 38% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% per year. It's pretty clear that Cairn Energy's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Cairn Energy after the downgrade.

Thirsting for more data? At least one of Cairn Energy's seven analysts has provided estimates out to 2022, which can be seen for 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.

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. 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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