Time To Worry? Analysts Are Downgrading Their The Williams Companies, Inc. (NYSE:WMB) Outlook
The analysts covering The Williams Companies, Inc. (NYSE:WMB) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from twelve analysts covering Williams Companies is for revenues of US$7.2b in 2020, implying an uncomfortable 11% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 537% to US$0.79. Previously, the analysts had been modelling revenues of US$8.2b and earnings per share (EPS) of US$1.02 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
Check out our latest analysis for Williams Companies
Despite the cuts to forecast earnings, there was no real change to the US$21.83 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Williams Companies at US$26.00 per share, while the most bearish prices it at US$16.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 11%, a significant reduction from annual growth of 3.1% 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 8.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Williams Companies is expected to lag 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 Williams Companies. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Williams Companies' revenues are expected to grow slower 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 Williams Companies.
There might be good reason for analyst bearishness towards Williams Companies, like the risk of cutting its dividend. Learn more, and discover the 2 other flags we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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.
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