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Analysts Are Much More Bearish On Frank's International N.V. (NYSE:FI) Than They Used To Be

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Simply Wall St
·4 min read
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The analysts covering Frank's International N.V. (NYSE:FI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the consensus from five analysts covering Frank's International is for revenues of US$389m in 2020, implying a painful 30% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 63% to US$0.48. However, before this estimates update, the consensus had been expecting revenues of US$526m and US$0.20 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Frank's International

NYSE:FI Past and Future Earnings May 19th 2020
NYSE:FI Past and Future Earnings May 19th 2020

The consensus price target was broadly unchanged at US$3.71, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 Frank's International, with the most bullish analyst valuing it at US$6.00 and the most bearish at US$2.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue shrink 0.2% per year. While this is interesting, Frank's International's, revenues are still expected to shrink next year, and at a faster rate than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Frank's International. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Frank's International.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Frank's International analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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. Thank you for reading.