It's shaping up to be a tough period for Scorpio Bulkers Inc. (NYSE:SALT), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Revenues missed expectations somewhat, coming in at US$41m, but statutory earnings fell catastrophically short, with a loss of US$18.12 some 382% larger than what the analysts had predicted. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Scorpio Bulkers after the latest results.
Taking into account the latest results, the six analysts covering Scorpio Bulkers provided consensus estimates of US$170.8m revenue in 2020, which would reflect a substantial 21% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$25.40 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$228.3m and losses of US$4.69 per share in 2020. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The average price target fell 22% to US$40.00, implicitly signalling that lower earnings per share are a leading indicator for Scorpio Bulkers' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Scorpio Bulkers, with the most bullish analyst valuing it at US$60.00 and the most bearish at US$20.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 21%, a significant reduction from annual growth of 32% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.5% annually for the foreseeable future. It's pretty clear that Scorpio Bulkers' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Scorpio Bulkers 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 2 warning signs for Scorpio Bulkers you should know about.
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