Cabot Oil & Gas Corporation (NYSE:COG) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues were US$386m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$0.14 were also better than expected, beating analyst predictions by 16%. 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 Cabot Oil & Gas after the latest results.
See our latest analysis for Cabot Oil & Gas
Taking into account the latest results, the current consensus, from the 13 analysts covering Cabot Oil & Gas, is for revenues of US$1.57b in 2020, which would reflect a not inconsiderable 8.8% reduction in Cabot Oil & Gas' sales over the past 12 months. Statutory earnings per share are expected to plunge 45% to US$0.64 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.56b and earnings per share (EPS) of US$0.57 in 2020. Although the revenue estimates have not really changed, we can see there's been a solid gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target was unchanged at US$21.54, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Cabot Oil & Gas at US$26.00 per share, while the most bearish prices it at US$13.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cabot Oil & Gas' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 8.8% revenue decline a notable change from historical growth of 9.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 0.3% annually for the foreseeable future. So it's pretty clear that Cabot Oil & Gas' revenues are expected to shrink faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Cabot Oil & Gas following these results. The consensus also reconfirmed their revenue estimates, suggesting that sales are performing in line with expectations. Plus, our data suggests that Cabot Oil & Gas is expected to perform worse than the wider industry. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Cabot Oil & Gas. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Cabot Oil & Gas going out to 2023, and you can see them free on our platform here..
You still need to take note of risks, for example - Cabot Oil & Gas has 2 warning signs we think you should be aware of.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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Earnings Beat: Cabot Oil & Gas Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models - Yahoo Finance
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