MEG Energy Corp. (TSE:MEG) last week reported its latest second-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It looks like a pretty bad result, all things considered. Although revenues of CA$1.4b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 25% to hit CA$0.50 per share. 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 MEG Energy after the latest results.

View our latest analysis for MEG Energy

After the latest results, the consensus from MEG Energy's four analysts is for revenues of CA$5.44b in 2024, which would reflect a discernible 3.2% decline in revenue compared to the last year of performance. Per-share earnings are expected to climb 19% to CA$2.59. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$5.64b and earnings per share (EPS) of CA$2.48 in 2024. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.

The consensus has made no major changes to the price target of CA$34.77, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values MEG Energy at CA$40.00 per share, while the most bearish prices it at CA$28.00. 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.

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. We would highlight that revenue is expected to reverse, with a forecast 6.3% annualised decline to the end of 2024. That is a notable change from historical growth of 16% 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 4.8% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MEG Energy is expected to lag 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 MEG Energy following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. With that said, earnings are more important to the long-term value of the business. The consensus price target held steady at CA$34.77, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for MEG Energy going out to 2026, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for MEG Energy that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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