It's been a good week for Baker Hughes Company (NYSE:BKR) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.2% to US$16.37. It was a pretty bad result overall; while revenues were in line with expectations at US$4.7b, statutory losses exploded to US$0.31 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Baker Hughes after the latest results.
After the latest results, the consensus from Baker Hughes' 25 analysts is for revenues of US$20.1b in 2020, which would reflect a not inconsiderable 10% decline in sales compared to the last year of performance. Losses are forecast to narrow 3.3% to US$15.96 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$20.1b and losses of US$15.97 per share in 2020.
The average price target fell 5.2% to US$20.38, with the ongoing losses seemingly a concern for the analysts, despite the lack of real change to the earnings forecasts. 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. There are some variant perceptions on Baker Hughes, with the most bullish analyst valuing it at US$26.00 and the most bearish at US$16.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 10% revenue decline a notable change from historical growth of 15% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.1% annually for the foreseeable future. It's pretty clear that Baker Hughes' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Baker Hughes' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Baker Hughes going out to 2024, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 1 warning sign for Baker Hughes that you should be aware of.
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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