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Market forces rained on the parade of TechnipFMC plc (NYSE:FTI) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from TechnipFMC's 23 analysts is for revenues of US$6.2b in 2021, which would reflect a stressful 53% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 98% to US$0.24. Before this latest update, the analysts had been forecasting revenues of US$13b and earnings per share (EPS) of US$0.65 in 2021. So we can see that the consensus has become notably more bearish on TechnipFMC's outlook with these numbers, making a sizeable cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.
The consensus price target fell 6.3% to US$12.52, implicitly signalling that lower earnings per share are a leading indicator for TechnipFMC's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values TechnipFMC at US$29.00 per share, while the most bearish prices it at US$3.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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. We would highlight that sales are expected to reverse, with the forecast 53% revenue decline a notable change from historical growth of 5.3% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - TechnipFMC is expected to lag the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for TechnipFMC dropped from profits to a loss next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for TechnipFMC going out to 2023, and you can see them 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. 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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