Today is shaping up negative for Gulf Keystone Petroleum Limited (LON:GKP) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Gulf Keystone Petroleum from its four analysts is for revenues of US$201m in 2025 which, if met, would be a major 33% increase on its sales over the past 12 months. Statutory earnings per share are presumed to soar 536% to US$0.21. Prior to this update, the analysts had been forecasting revenues of US$268m and earnings per share (EPS) of US$0.37 in 2025. Indeed, we can see that the analysts are a lot more bearish about Gulf Keystone Petroleum's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Gulf Keystone Petroleum

The average price target climbed 6.0% to US$2.41 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Gulf Keystone Petroleum analyst has a price target of US$2.92 per share, while the most pessimistic values it at US$1.89. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Gulf Keystone Petroleum is forecast to grow faster in the future than it has in the past, with revenues expected to display 33% annualised growth until the end of 2025. If achieved, this would be a much better result than the 0.08% annual decline 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 0.4% annually for the foreseeable future. So it's pretty clear that Gulf Keystone Petroleum is expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Gulf Keystone Petroleum analysts - going out to 2027, and you can see them free on our platform here.

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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.