There's been a major selloff in Shawcor Ltd. (TSE:SCL) shares in the week since it released its full-year report, with the stock down 22% to CA$8.42. Revenues came in at CA$1.5b, in line with estimates, while Shawcor reported a statutory loss of CA$0.47 per share, well short of prior analyst forecasts for a profit. 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 analysts have changed their mind on Shawcor after the latest results.
Following last week's earnings report, Shawcor's seven analysts are forecasting 2020 revenues to be CA$1.50b, approximately in line with the last 12 months. Earnings are expected to improve, with Shawcor forecast to report a statutory profit of CA$0.21 per share. Before this earnings report, analysts had been forecasting revenues of CA$1.62b and earnings per share (EPS) of CA$0.43 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
It'll come as no surprise then, to learn that analysts have cut their price target 5.7% to CA$14.56. 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 Shawcor, with the most bullish analyst valuing it at CA$20.00 and the most bearish at CA$12.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. From these estimates it looks as though analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 0.7% per year. While Shawcor's revenues are expected to improve, it seems that analysts are only expecting them to grow at about the same rate as the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Shawcor. Analysts also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Shawcor analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Shawcor's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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