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As you might know, Meridian Energy Limited (NZSE:MEL) recently reported its half-year numbers. Meridian Energy reported in line with analyst predictions, delivering revenues of NZ$1.9b and statutory earnings per share of NZ$0.069, suggesting the business is executing well and in line with its plan. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Meridian Energy's five analysts are now forecasting revenues of NZ$3.62b in 2021. This would be a credible 3.7% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 22% to NZ$0.10. In the lead-up to this report, the analysts had been modelling revenues of NZ$3.61b and earnings per share (EPS) of NZ$0.097 in 2021. So the consensus seems to have become somewhat more optimistic on Meridian Energy's earnings potential following these results.
The consensus price target was unchanged at NZ$5.34, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values Meridian Energy at NZ$8.15 per share, while the most bearish prices it at NZ$3.90. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. It's pretty clear that there is an expectation that Meridian Energy's revenue growth will slow down substantially, with revenues next year expected to grow 3.7%, compared to a historical growth rate of 11% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that Meridian Energy is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Meridian Energy following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Meridian Energy's revenues are expected to perform worse than the wider industry. The consensus price target held steady at NZ$5.34, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Meridian Energy going out to 2025, and you can see them free on our platform here.
Plus, you should also learn about the 3 warning signs we've spotted with Meridian Energy (including 1 which shouldn't be ignored) .
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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