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NorthWestern Corporation (NYSE:NWE): Earnings Growth Remains Elusive

Simply Wall St

Based on NorthWestern Corporation’s (NYSE:NWE) earnings update in December 2018, analyst forecasts seem bearish, with earnings expected to decline by -11% in the upcoming year relative to the past 5-year average growth rate of 12%. Currently with a trailing-twelve-month profit of US$197m, the consensus growth rate suggests that earnings will drop to US$175m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for NorthWestern in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for NorthWestern

Can we expect NorthWestern to keep growing?

The longer term view from the 3 analysts covering NWE is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for NWE, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:NWE Past and Future Earnings, March 16th 2019

By 2022, NWE’s earnings should reach US$187m, from current levels of US$197m, resulting in an annual growth rate of 2.2%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $3.7 in the final year of forecast compared to the current $3.94 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 17% to 14% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For NorthWestern, I’ve put together three essential factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is NorthWestern worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NorthWestern is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of NorthWestern? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.