In This Article:
Shareholders in Devon Energy Corporation (NYSE:DVN) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. The stock price has risen 4.5% to US$27.01 over the past week, suggesting investors are becoming more optimistic. Could this big upgrade push the stock even higher?
Following the upgrade, the most recent consensus for Devon Energy from its 24 analysts is for revenues of US$9.6b in 2021 which, if met, would be a sizeable 22% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 386% to US$2.61. Prior to this update, the analysts had been forecasting revenues of US$8.0b and earnings per share (EPS) of US$2.58 in 2021. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.
Check out our latest analysis for Devon Energy
Even though revenue forecasts increased, there was no change to the consensus price target of US$37.58, suggesting the analysts are focused on earnings as the driver of value creation. 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 Devon Energy analyst has a price target of US$47.00 per share, while the most pessimistic values it at US$32.00. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Devon Energy's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 49% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 11% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 2.2% annually. Not only are Devon Energy's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Devon Energy.