News Flash: 3 Analysts Think SilverBow Resources, Inc. (NYSE:SBOW) Earnings Are Under Threat
The analysts covering SilverBow Resources, Inc. (NYSE:SBOW) 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 analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 18% to US$29.38 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the downgrade, the current consensus from SilverBow Resources' three analysts is for revenues of US$794m in 2023 which - if met - would reflect a reasonable 5.4% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to sink 13% to US$13.23 in the same period. Prior to this update, the analysts had been forecasting revenues of US$927m and earnings per share (EPS) of US$14.85 in 2023. Indeed, we can see that the analysts are a lot more bearish about SilverBow Resources' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for SilverBow Resources
Despite the cuts to forecast earnings, there was no real change to the US$51.25 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic SilverBow Resources analyst has a price target of US$70.00 per share, while the most pessimistic values it at US$37.00. 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.
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. We would highlight that SilverBow Resources' revenue growth is expected to slow, with the forecast 5.4% annualised growth rate until the end of 2023 being well below the historical 24% p.a. growth over the last five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 6.4% annually. Factoring in the forecast slowdown in growth, it's pretty clear that SilverBow Resources is still expected to grow faster than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for SilverBow Resources. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. 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 SilverBow Resources.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with SilverBow Resources' financials, such as dilutive stock issuance over the past year. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.
You can also see our analysis of SilverBow Resources' Board and CEO remuneration and experience, and whether company insiders have been buying stock.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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