Southwestern Energy Company (NYSE:SWN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline.
After this upgrade, Southwestern Energy's 14 analysts are now forecasting revenues of US$8.7b in 2022. This would be a satisfactory 2.3% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$1.37 per share this year. Prior to this update, the analysts had been forecasting revenues of US$6.6b and earnings per share (EPS) of US$1.31 in 2022. Sentiment certainly seems to have improved in recent times, with a very substantial lift in revenue and a small lift in earnings per share estimates.
See our latest analysis for Southwestern Energy
It will come as no surprise to learn that the analysts have increased their price target for Southwestern Energy 18% to US$10.44 on the back of these upgrades. 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 Southwestern Energy, with the most bullish analyst valuing it at US$16.00 and the most bearish at US$8.25 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the 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. We would highlight that Southwestern Energy's revenue growth is expected to slow, with the forecast 3.1% annualised growth rate until the end of 2022 being well below the historical 12% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.1% per year. So it's pretty clear that, while Southwestern Energy's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Southwestern Energy.