MEG Energy Corp. Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now
It's been a good week for MEG Energy Corp. (TSE:MEG) shareholders, because the company has just released its latest yearly results, and the shares gained 8.5% to CA$29.34. It looks like the results were a bit of a negative overall. While revenues of CA$5.7b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 9.0% to hit CA$1.98 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
See our latest analysis for MEG Energy
Taking into account the latest results, the three analysts covering MEG Energy provided consensus estimates of CA$4.64b revenue in 2024, which would reflect a not inconsiderable 18% decline over the past 12 months. Statutory earnings per share are predicted to shoot up 24% to CA$2.59. Before this earnings report, the analysts had been forecasting revenues of CA$5.73b and earnings per share (EPS) of CA$2.46 in 2024. It looks like there's been a meaningful change to the consensus view following the recent earnings report, with the analysts making a real cut to to revenue forecasts and a small increase to to next year's earnings estimates.
There's been no real change to the average price target of CA$31.04, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. There are some variant perceptions on MEG Energy, with the most bullish analyst valuing it at CA$35.00 and the most bearish at CA$26.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting MEG Energy is an easy business to forecast or the the analysts are all using similar assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that revenue is expected to reverse, with a forecast 18% annualised decline to the end of 2024. That is a notable change from historical growth of 17% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.1% annually for the foreseeable future. It's pretty clear that MEG Energy's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around MEG Energy's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at CA$31.04, with the latest estimates not enough to have an impact on their price targets.
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 MEG Energy going out to 2025, and you can see them free on our platform here..
You still need to take note of risks, for example - MEG Energy has 2 warning signs (and 1 which is significant) we think you should know about.
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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.
