The analysts covering Brigham Minerals, Inc. (NYSE:MNRL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from Brigham Minerals' seven analysts is for revenues of US$81m in 2020, which would reflect a stressful 20% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to crater 52% to US$0.13 in the same period. Prior to this update, the analysts had been forecasting revenues of US$91m and earnings per share (EPS) of US$0.16 in 2020. Indeed, we can see that the analysts are a lot more bearish about Brigham Minerals' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Analysts made no major changes to their price target of US$13.59, suggesting the downgrades are not expected to have a long-term impact on Brigham Minerals'valuation. 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. Currently, the most bullish analyst values Brigham Minerals at US$18.00 per share, while the most bearish prices it at US$9.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Brigham Minerals' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 20%, a significant reduction from annual growth of 51% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.1% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Brigham Minerals is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. 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 Brigham Minerals.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Brigham Minerals' business, like the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other concern we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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