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Today is shaping up negative for NRG Energy, Inc. (NYSE:NRG) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the latest downgrade, the current consensus, from the seven analysts covering NRG Energy, is for revenues of US$19b in 2022, which would reflect a sizeable 29% reduction in NRG Energy's sales over the past 12 months. Statutory earnings per share are anticipated to tumble 60% to US$3.62 in the same period. Previously, the analysts had been modelling revenues of US$21b and earnings per share (EPS) of US$3.69 in 2022. 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.
View our latest analysis for NRG Energy
Analysts made no major changes to their price target of US$43.91, suggesting the downgrades are not expected to have a long-term impact on NRG Energy's valuation. 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 NRG Energy, with the most bullish analyst valuing it at US$52.00 and the most bearish at US$36.00 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 29% by the end of 2022. This indicates a significant reduction from annual growth of 18% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.6% per year. It's pretty clear that NRG Energy's revenues are expected to perform substantially worse than the wider 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on NRG Energy after today.