Shorn Like A Sheep: Analysts Just Shaved Their BW Offshore Limited (OB:BWO) Forecasts Dramatically
One thing we could say about the analysts on BW Offshore Limited (OB:BWO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 50% to US$23.18 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.
After the downgrade, the consensus from BW Offshore's four analysts is for revenues of US$771m in 2020, which would reflect a concerning 33% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to crater 25% to US$0.33 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$0.78 in 2020. Indeed, we can see that the analysts are a lot more bearish about BW Offshore's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for BW Offshore
It'll come as no surprise then, to learn that the analysts have cut their price target 32% to US$6.98. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values BW Offshore at US$9.68 per share, while the most bearish prices it at US$3.75. 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 BW Offshore's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 33% revenue decline a notable change from historical growth of 1.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.7% next year. It's pretty clear that BW Offshore's revenues are expected to perform substantially worse than 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. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of BW Offshore.
Worse, BW Offshore is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
We also provide an overview of the BW Offshore Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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