Investors in Essential Utilities, Inc. (NYSE:WTRG) had a good week, as its shares rose 4.7% to close at US$37.78 following the release of its quarterly results. The results were mixed; although revenues of US$612m fell 18% short of what the analysts had predicted, per-share (statutory) earnings of US$0.97 beat expectations by 25%. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Essential Utilities

After the latest results, the six analysts covering Essential Utilities are now predicting revenues of US$2.14b in 2024. If met, this would reflect a decent 10% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to decrease 2.2% to US$2.05 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$2.36b and earnings per share (EPS) of US$1.99 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.

There's been no real change to the average price target of US$44.00, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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 Essential Utilities, with the most bullish analyst valuing it at US$60.00 and the most bearish at US$39.96 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Essential Utilities shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Essential Utilities' past performance and to peers in the same industry. 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 14% growth on an annualised basis. This is compared to a historical growth rate of 20% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.4% per year. 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 biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Essential Utilities' earnings potential next year. They also downgraded Essential Utilities' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Essential Utilities going out to 2026, and you can see them free on our platform here.

You still need to take note of risks, for example - Essential Utilities has 4 warning signs (and 1 which is a bit concerning) 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.