Xcel Energy Inc. (NASDAQ:XEL) missed earnings with its latest quarterly results, disappointing overly-optimistic forecasters. It looks like a weak result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of US$2.8b missed by 14%, and statutory earnings per share of US$0.56 fell short of forecasts by 5.5%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Xcel Energy's ten analysts is for revenues of US$11.9b in 2020, which would reflect a modest 6.1% increase on its sales over the past 12 months. Statutory earnings per share are predicted to increase 6.3% to US$2.76. Before this earnings report, the analysts had been forecasting revenues of US$12.1b and earnings per share (EPS) of US$2.78 in 2020. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The consensus has reconfirmed its price target of US$64.13, showing that the analysts don't expect weaker sales expectations next year to have a material impact on Xcel Energy's market value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Xcel Energy, with the most bullish analyst valuing it at US$76.00 and the most bearish at US$48.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. The analysts are definitely expecting Xcel Energy'sgrowth to accelerate, with the forecast 6.1% growth ranking favourably alongside historical growth of 0.9% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 3.3% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Xcel Energy is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Xcel Energy going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Xcel Energy (of which 1 is significant!) you should know about.
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