It's been a mediocre week for Pacific Basin Shipping Limited (HKG:2343) shareholders, with the stock dropping 15% to HK$1.16 in the week since its latest yearly results. Statutory earnings per share fell badly short of expectations, coming in at US$0.0055, some 36% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$1.6b. Following the result, 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, Pacific Basin Shipping's eight analysts currently expect revenues in 2020 to be US$1.61b, approximately in line with the last 12 months. Statutory per share are forecast to be US$0.0054, approximately in line with the last 12 months. Before this earnings report, analysts had been forecasting revenues of US$1.79b and earnings per share (EPS) of US$0.02 in 2020. Indeed, we can see that analysts are a lot more bearish about Pacific Basin Shipping's prospects following the latest results, administering a real cut to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that analysts have cut their price target 7.5% to US$0.24. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Pacific Basin Shipping, with the most bullish analyst valuing it at US$0.27 and the most bearish at US$0.20 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Pacific Basin Shipping's performance in recent years. It's pretty clear that analysts expect Pacific Basin Shipping's revenue growth will slow down substantially, with revenues next year expected to grow 1.2%, compared to a historical growth rate of 3.4% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.8% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Pacific Basin Shipping.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Pacific Basin Shipping's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Pacific Basin Shipping analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Pacific Basin Shipping is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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