One thing we could say about the analysts on EOG Resources, Inc. (NYSE:EOG) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the 20 analysts covering EOG Resources, is for revenues of US$12b in 2020, which would reflect a stressful 27% reduction in EOG Resources' sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of US$0.39 in 2020, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of US$13b and earnings per share (EPS) of US$0.40 in 2020. There looks to have been a major change in sentiment regarding EOG Resources' prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.
Analysts lifted their price target 5.4% to US$58.94, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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 EOG Resources at US$80.00 per share, while the most bearish prices it at US$41.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. We would highlight that sales are expected to reverse, with the forecast 27% revenue decline a notable change from historical growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - EOG Resources is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting EOG Resources to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. 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 EOG Resources analysts - going out to 2023, 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.