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Celebrations may be in order for ConocoPhillips (NYSE:COP) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The stock price has risen 8.1% to US$57.00 over the past week, suggesting investors are becoming more optimistic. Could this big upgrade push the stock even higher?
Following the upgrade, the current consensus from ConocoPhillips' 18 analysts is for revenues of US$38b in 2021 which - if met - would reflect a substantial 69% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 18,625% to US$3.31. Prior to this update, the analysts had been forecasting revenues of US$32b and earnings per share (EPS) of US$2.71 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$66.29, suggesting that the forecast performance does not have a long term impact on the company's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic ConocoPhillips analyst has a price target of US$85.00 per share, while the most pessimistic values it at US$55.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting ConocoPhillips' growth to accelerate, with the forecast 101% annualised growth to the end of 2021 ranking favourably alongside historical growth of 0.4% per annum 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 4.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that ConocoPhillips is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So ConocoPhillips could be a good candidate for more research.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ConocoPhillips going out to 2025, and you can see them free on our platform here..
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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