It's been a good week for CNOOC Limited (HKG:883) shareholders, because the company has just released its latest half-year results, and the shares gained 5.4% to HK$21.55. It was a mildly positive result, with revenues exceeding expectations at CN¥227b, while statutory earnings per share (EPS) of CN¥2.60 were in line with analyst forecasts. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from CNOOC's 16 analysts is for revenues of CN¥441.9b in 2024, which would reflect a discernible 2.1% decline in revenue compared to the last year of performance. Per-share earnings are expected to rise 5.2% to CN¥3.09. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥435.3b and earnings per share (EPS) of CN¥3.02 in 2024. So the consensus seems to have become somewhat more optimistic on CNOOC's earnings potential following these results.
There's been no major changes to the consensus price target of HK$23.58, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock'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. The most optimistic CNOOC analyst has a price target of HK$31.66 per share, while the most pessimistic values it at HK$9.11. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 4.1% by the end of 2024. This indicates a significant reduction from annual growth of 20% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 0.02% annually for the foreseeable future. So it's pretty clear that CNOOC's revenues are expected to shrink faster than 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 CNOOC following these results. They also made no changes to their revenue estimates, implying the business is not expected to experience any major impacts to the current trajectory in the near term, even though it is expected to trail the wider industry. The consensus price target held steady at HK$23.58, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on CNOOC. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple CNOOC analysts - going out to 2026, and you can see them free on our platform here.
You still need to take note of risks, for example - CNOOC has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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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.
