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Magnolia Oil & Gas Corporation Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

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Simply Wall St
·4 min read
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As you might know, Magnolia Oil & Gas Corporation (NYSE:MGY) last week released its latest third-quarter, and things did not turn out so great for shareholders. Magnolia Oil & Gas missed analyst forecasts, with revenues of US$121m and statutory earnings per share (EPS) of US$0.05, falling short by 5.4% and 8.8% respectively. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Magnolia Oil & Gas

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earnings-and-revenue-growth

Following last week's earnings report, Magnolia Oil & Gas' eleven analysts are forecasting 2021 revenues to be US$626.6m, approximately in line with the last 12 months. Earnings are expected to improve, with Magnolia Oil & Gas forecast to report a statutory profit of US$0.50 per share. In the lead-up to this report, the analysts had been modelling revenues of US$650.1m and earnings per share (EPS) of US$0.47 in 2021. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

There's been no real change to the average price target of US$7.42, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Magnolia Oil & Gas, with the most bullish analyst valuing it at US$11.00 and the most bearish at US$5.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Magnolia Oil & Gas' past performance and to peers in the same industry. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, Magnolia Oil & Gas' sales have shrunk approximately 48% annually over the past year. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 11% next year. So it's pretty clear that, although revenues are improving, Magnolia Oil & Gas is still expected to grow slower than the industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Magnolia Oil & Gas' earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings are more important to the intrinsic value of the business. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Magnolia Oil & Gas going out to 2022, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 1 warning sign for Magnolia Oil & Gas that you should be aware of.

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.

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