News Flash: 12 Analysts Think Southwestern Energy Company (NYSE:SWN) Earnings Are Under Threat

·3 min read

The analysts covering Southwestern Energy Company (NYSE:SWN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. At US$5.30, shares are up 5.2% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After the downgrade, the consensus from Southwestern Energy's twelve analysts is for revenues of US$8.1b in 2023, which would reflect a painful 46% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to crater 44% to US$0.94 in the same period. Previously, the analysts had been modelling revenues of US$11b and earnings per share (EPS) of US$1.46 in 2023. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Southwestern Energy


Analysts made no major changes to their price target of US$8.71, suggesting the downgrades are not expected to have a long-term impact on Southwestern Energy's valuation. 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 Southwestern Energy at US$14.00 per share, while the most bearish prices it at US$5.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 46% by the end of 2023. This indicates a significant reduction from annual growth of 34% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 6.6% per year. So it's pretty clear that Southwestern Energy's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Southwestern Energy. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Southwestern Energy revenue is expected to perform worse than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Southwestern Energy.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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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.

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