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Upgrade: Analysts Just Made A Substantial Increase To Their SSE plc (LON:SSE) Forecasts

Shareholders in SSE plc (LON:SSE) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance.

After this upgrade, SSE's 15 analysts are now forecasting revenues of UK£11b in 2023. This would be a satisfactory 3.2% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 77% to UK£1.70. Previously, the analysts had been modelling revenues of UK£9.9b and earnings per share (EPS) of UK£1.60 in 2023. Sentiment certainly seems to have improved in recent times, with a nice increase in revenue and a slight bump in earnings per share estimates.

See our latest analysis for SSE

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Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£20.17, suggesting that the forecast performance does not have a long term impact on the company's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on SSE, with the most bullish analyst valuing it at UK£22.00 and the most bearish at UK£17.38 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that SSE's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 6.5% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 30% a year over the past five years. What's also interesting is that our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue decline 0.6% annually for the foreseeable future. So it's pretty clear that SSE is expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So SSE could be a good candidate for more research.

Analysts are clearly in love with SSE at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as its declining profit margins. You can learn more, and discover the 2 other risks we've identified, for free on our platform here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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