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Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Analysts Just Cut Their EPS Forecasts

Simply Wall St
·4 mins read

One thing we could say about the analysts on Patterson-UTI Energy, Inc. (NASDAQ:PTEN) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Surprisingly the share price has been buoyant, rising 40% to US$2.89 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 consensus from 19 analysts covering Patterson-UTI Energy is for revenues of US$1.0b in 2020, implying a painful 58% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$1.3b of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on Patterson-UTI Energy, given the measurable cut to revenue estimates.

Check out our latest analysis for Patterson-UTI Energy

NasdaqGS:PTEN Past and Future Earnings April 24th 2020
NasdaqGS:PTEN Past and Future Earnings April 24th 2020

We'd point out that there was no major changes to their price target of US$2.93, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Patterson-UTI Energy analyst has a price target of US$7.00 per share, while the most pessimistic values it at US$1.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 58%, a significant reduction from annual growth of 6.9% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.3% next year. So it's pretty clear that Patterson-UTI Energy's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting for revenues to shrink at a quicker rate than companies in the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Patterson-UTI Energy after the downgrade.

That said, the analysts might have good reason to be negative on Patterson-UTI Energy, given the risk of cutting its dividend. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.