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TORM plc Just Reported Third-Quarter Earnings: Have Analysts Changed Their Mind On The Stock?

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TORM plc (CPH:TRMD A) defied analyst predictions to release its quarterly results, which were ahead of market expectations. TORM outperformed on both revenues and the expected loss per share, with revenues of US$147m beating estimates by 13%. Losses were US$0.12, 300% smaller than analysts expected. 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. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.

Check out our latest analysis for TORM

CPSE:TRMD A Past and Future Earnings, November 15th 2019
CPSE:TRMD A Past and Future Earnings, November 15th 2019

After the latest results, the dual analysts covering TORM are now predicting revenues of US$839.4m in 2020. If met, this would reflect a major 26% improvement in sales compared to the last 12 months. Earnings per share are expected to shoot up 424% to US$1.26. Before this earnings report, analysts had been forecasting revenues of US$842.9m and earnings per share (EPS) of US$1.33 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$10.45, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation.

It can also be useful to step back and take a broader view of how analyst forecasts compare to TORM's performance in recent years. Analysts are definitely expecting TORM's growth to accelerate, with the forecast 26% growth ranking favourably alongside historical growth of 8.1% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.0% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that TORM is expected to grow much faster than its market.

The Bottom Line

The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for TORM. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that TORM's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$10.45, with the latest estimates not enough to have an impact on analysts' estimated valuations.

With that in mind, we wouldn't be too quick to come to a conclusion on TORM. Long-term earnings power is much more important than next year's profits. We have analyst estimates for TORM going out as far as 2021, and you can see them free on our platform here.

It might also be worth considering whether TORM's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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.

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. Thank you for reading.