A week ago, National Energy Services Reunited Corp. (NASDAQ:NESR) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of US$199m arriving 8.4% ahead of forecasts. Statutory earnings per share (EPS) were US$0.13, 2.7% ahead of estimates. 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 National Energy Services Reunited after the latest results.
After the latest results, the six analysts covering National Energy Services Reunited are now predicting revenues of US$777.3m in 2020. If met, this would reflect a decent 10% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 11% to US$0.39 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$783.2m and earnings per share (EPS) of US$0.45 in 2020. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
The average price target fell 5.8% to US$12.86, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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 National Energy Services Reunited, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$9.00 per share. 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. One thing stands out from these estimates, which is that National Energy Services Reunited is forecast to grow faster in the future than it has in the past, with revenues expected to grow 10%. If achieved, this would be a much better result than the 5.9% annual decline over the past year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 0.05% per year. Not only are National Energy Services Reunited's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of National Energy Services Reunited's future valuation.
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 National Energy Services Reunited going out to 2022, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for National Energy Services Reunited (of which 1 makes us a bit uncomfortable!) you should know about.
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