Yahoo Finance BP p.l.c. (LON:BP.) Analysts Are Cutting Their Estimates: Here's What You Need To Know
Shareholders might have noticed that BP p.l.c. (LON:BP.) filed its first-quarter result this time last week. The early response was not positive, with shares down 3.2% to UK£2.99 in the past week. Revenues of US$60b beat expectations by a respectable 4.8%, although statutory losses per share increased. BP lost US$0.22, which was 832% more than what the analysts had included in their models. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for BP
Taking into account the latest results, the 22 analysts covering BP provided consensus estimates of US$172.5b revenue in 2020, which would reflect a substantial 36% decline on its sales over the past 12 months. Per-share statutory losses are expected to explode, reaching US$0.046 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$192.7b and earnings per share (EPS) of US$0.05 in 2020. There looks to have been a major change in sentiment regarding BP's prospects following the latest results, with a real cut to revenues and the analysts now forecasting a loss instead of a profit.
The average price target was broadly unchanged at US$4.74, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic BP analyst has a price target of US$6.84 per share, while the most pessimistic values it at US$2.25. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 36%, a significant reduction from annual growth of 4.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - BP is expected to lag the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for BP dropped from profits to a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple BP analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for BP (1 shouldn't be ignored!) that you need to be mindful of.
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