BP p.l.c. (LON:BP.) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that BP will make substantially more sales than they'd previously expected.
Following the upgrade, the current consensus from BP's 20 analysts is for revenues of US$187b in 2022 which - if met - would reflect a decent 9.4% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$153b in 2022. It looks like there's been a clear increase in optimism around BP, given the considerable lift to revenue forecasts.
We'd point out that there was no major changes to their price target of US$6.08, suggesting the latest estimates were not enough to shift their view on the value of the business. 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 BP, with the most bullish analyst valuing it at US$7.16 and the most bearish at US$3.84 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. One thing stands out from these estimates, which is that BP is forecast to grow faster in the future than it has in the past, with revenues expected to display 13% annualised growth until the end of 2022. If achieved, this would be a much better result than the 13% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to decline 1.5% per year. So although BP is expected to return to growth, it's also expected to grow revenues during a time when the wider industry is estimated to see revenue decline.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They're also forecasting for revenues to perform better than companies in the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at BP.
Better yet, BP is expected to break-even soon - within the next few years - according to analyst forecasts, which would be a momentous event for shareholders. For more information, you can click through to our free platform to learn more about these forecasts.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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.