Santos Limited (ASX:STO) Interim Results Just Came Out: Here's What Analysts Are Forecasting For This Year
Last week saw the newest half-year earnings release from Santos Limited (ASX:STO), an important milestone in the company's journey to build a stronger business. Santos reported US$3.0b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.24 beat expectations, being 3.2% higher than what the analysts expected. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
View our latest analysis for Santos
Following the recent earnings report, the consensus from 14 analysts covering Santos is for revenues of US$6.11b in 2023. This implies a definite 13% decline in revenue compared to the last 12 months. Statutory earnings per share are forecast to sink 14% to US$0.46 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$6.12b and earnings per share (EPS) of US$0.53 in 2023. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at AU$9.03, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Santos, with the most bullish analyst valuing it at AU$12.87 and the most bearish at AU$7.63 per share. 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.
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 24% annualised decline to the end of 2023. 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 industry are forecast to see their revenue decline 2.1% annually for the foreseeable future. The forecasts do look bearish for Santos, since they're expecting it to shrink faster than the industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. The consensus also reconfirmed their revenue estimates, suggesting that it is performing in line with expectations. Plus, our data suggests that Santos is expected to perform worse than the wider industry. The consensus price target held steady at AU$9.03, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Santos going out to 2025, and you can see them free on our platform here.
Even so, be aware that Santos is showing 1 warning sign in our investment analysis , 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.
