Santos Limited (ASX:STO) shareholders are likely to be a little disappointed as shares fell 3.0% to AU$7.44 in the week following the release of its latest half-year results. Santos reported revenue of US$2.7 billion, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.20 beat expectations, coming in 2.6% ahead of analyst expectations. Earnings results are an important time for investors as they can track a company’s performance, look at what analysts are forecasting for next year, and see if there has been a change in sentiment towards the company. We’ve compiled the most up-to-date statutory forecasts to see if analysts have changed their earnings models following these results.
Check out our latest analysis for Santos
Taking into account the latest results, the 14 analysts covering Santos gave consensus estimates for revenues of $5.51 billion in 2024, a slight decrease of 2.2% from the last 12 months. Statutory earnings per share are expected to increase by 5.4% to $0.41. However, prior to the release of the latest results, analysts had been expecting revenues of $5.54 billion and earnings per share (EPS) of $0.42 in 2024. Given the slight decrease in their earnings per share numbers for next year, analysts seem to be a bit more negative on the company after the latest results.
It may be surprising to see that the consensus price target remained largely unchanged at AU$8.52, making it clear to analysts that the forecast earnings hit is not expected to have a major impact on valuation. However, that’s not the only conclusion we can draw from this data, as some investors also like to consider the range of estimates when evaluating analysts’ price targets. The most optimistic Santos analyst has a price target of AU$12.50 per share, while the most pessimistic puts it at AU$7.52. This is a fairly wide range of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the company.
These estimates are interesting, but it may be useful to paint the forecasts a little more broadly when comparing them to Santos’ past performance and to peers in the same industry. We’d like to highlight that revenue trajectory is expected to reverse, with a forecast decline of 4.4% on an annualized basis by the end of 2024. That’s a notable change from the historical growth of 14% over the past five years. Compare this to our data, which suggests other companies in the same industry are expected to grow revenue by 7.0% per year overall. So while revenue is forecast to decline, there is no silver lining to this cloud – Santos is expected to underperform the industry as a whole.
The conclusion
The biggest concern is that analysts have lowered their earnings per share estimates, suggesting that Santos may be facing business headwinds. Fortunately, analysts have also reaffirmed their revenue estimates, suggesting that the company is in line with expectations. However, our data suggests that Santos’ revenue is expected to underperform the wider industry. There has been no real change in the consensus price target, suggesting that the company’s intrinsic value has not changed much with the latest estimates.
Continuing with this thought, we believe the company’s long-term prospects are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Santos out to 2026, and you can see them free on our platform here.
Before you take the next step, you should know about the 1 warning sign for Santos that we uncovered.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
