Vermilion Energy Inc. Just Beat EPS By 43%: Here's What Analysts Think Will Happen Next
A week ago, Vermilion Energy Inc. (TSE:VET) came out with a strong set of annual numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of CA$3.4b, some 9.4% above estimates, and statutory earnings per share (EPS) coming in at CA$7.80, 43% ahead of expectations. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Vermilion Energy after the latest results.
View our latest analysis for Vermilion Energy
Taking into account the latest results, the current consensus, from the five analysts covering Vermilion Energy, is for revenues of CA$2.71b in 2023, which would reflect a painful 21% reduction in Vermilion Energy's sales over the past 12 months. Statutory earnings per share are expected to crater 49% to CA$4.12 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$3.04b and earnings per share (EPS) of CA$6.45 in 2023. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
It'll come as no surprise then, to learn that the analysts have cut their price target 5.6% to CA$30.89. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Vermilion Energy at CA$40.50 per share, while the most bearish prices it at CA$23.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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 21% by the end of 2023. This indicates a significant reduction from annual growth of 18% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.4% per year. The forecasts do look bearish for Vermilion Energy, since they're expecting it to shrink faster than the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Vermilion Energy. Unfortunately they also downgraded their revenue estimates, and our analysts estimates suggest that Vermilion Energy is still expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Vermilion Energy. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Vermilion Energy analysts - going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Vermilion Energy (at least 1 which can't be ignored) , and understanding these should be part of your investment process.
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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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