One thing we could say about the analysts on Murphy Oil Corporation (NYSE:MUR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Shares are up 5.5% to US$44.45 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the current consensus, from the eight analysts covering Murphy Oil, is for revenues of US$3.3b in 2023, which would reflect a stressful 23% reduction in Murphy Oil's sales over the past 12 months. Statutory earnings per share are supposed to reduce 2.4% to US$6.07 in the same period. Previously, the analysts had been modelling revenues of US$3.9b and earnings per share (EPS) of US$6.72 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.
See our latest analysis for Murphy Oil
Despite the cuts to forecast earnings, there was no real change to the US$50.69 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Murphy Oil at US$67.00 per share, while the most bearish prices it at US$34.00. 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.
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 annualised revenue decline of 23% by the end of 2023. This indicates a significant reduction from annual growth of 15% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 6.5% per year. The forecasts do look bearish for Murphy Oil, since they're expecting it to shrink faster than the industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Murphy Oil revenue is expected to perform worse than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Murphy Oil after today.
That said, the analysts might have good reason to be negative on Murphy Oil, given recent substantial insider selling. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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