Last week, you might have seen that Vallourec S.A. (EPA:VK) released its third-quarter result to the market. The early response was not positive, with shares down 5.0% to €2.41 in the past week. It was a pretty bad result overall; while revenues were in line with expectations at €1.1b, losses exploded to €0.10 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
After the latest results, the twelve analysts covering Vallourec are now predicting revenues of €4.69b in 2020. If met, this would reflect a notable 9.5% improvement in sales compared to the last 12 months. Losses are forecast to balloon 81% to €0.13 per share. Before this earnings announcement, analysts had been forecasting revenues of €4.70b and losses of €0.07 per share in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
As a result, there was no major change to the consensus price target of €2.92, with analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. 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. The most optimistic Vallourec analyst has a price target of €4.80 per share, while the most pessimistic values it at €0.90. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Vallourec's performance in recent years. For example, we noticed that Vallourec's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 9.5%, well above its historical decline of 5.9% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 8.5% per year. So it looks like Vallourec is expected to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that analysts reconfirmed their loss per share estimates for next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at €2.92, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Vallourec going out to 2023, and you can see them free on our platform here..
You can also view our analysis of Vallourec's balance sheet, and whether we think Vallourec is carrying too much debt, for free on our platform here.
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