Essential Utilities, Inc. (NYSE:WTRG) last week reported its latest annual 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$2.1b, 11% below analyst expectations, although losses didn't appear to worsen significantly, with a per-share statutory loss of US$1.86 being in line with what the analysts forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Essential Utilities' seven analysts are now forecasting revenues of US$2.36b in 2024. This would be a solid 15% improvement in revenue compared to the last 12 months. Per-share earnings are expected to rise 9.2% to US$1.99. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.43b and earnings per share (EPS) of US$2.01 in 2024. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average price target was steady at US$44.70even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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. Currently, the most bullish analyst values Essential Utilities at US$60.00 per share, while the most bearish prices it at US$39.96. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Essential Utilities' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 15% growth on an annualised basis. This is compared to a historical growth rate of 22% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.7% annually. Even after the forecast slowdown in growth, it seems obvious that Essential Utilities is also expected to grow faster than the wider 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. They also downgraded Essential Utilities' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$44.70, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Essential Utilities analysts - going out to 2026, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Essential Utilities (1 shouldn't be ignored!) that we have uncovered.
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