One of the biggest stories of last week was how ION Geophysical Corporation (NYSE:IO) shares plunged 23% in the week since its latest yearly results, closing yesterday at US$4.24. It looks like weak result overall, with ongoing losses and revenues of US$175m falling short of analyst predictions. The losses were a relative bright spot though, with a per-share (statutory) loss of US$3.41 being 94% smaller than what analysts had predicted. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on ION Geophysical after the latest results.
Following the latest results, ION Geophysical’s dual analysts are now forecasting revenues of US$183.8m in 2020. This would be a credible 5.2% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$1.78 per share. Before this latest report, the consensus had been expecting revenues of US$216.9m and US$0.95 per share in losses. Indeed, we can see that analysts are a lot more bearish about ION Geophysical’s prospects following the latest results, administering a real cut to revenue estimates and slashing their EPS estimates to boot.
The average analyst price target fell 17% to US$9.50, implicitly signalling that lower earnings per share are a leading indicator for ION Geophysical’s valuation.
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. For example, we noticed that ION Geophysical’s rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 5.2%, well above its historical decline of 17% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue grow 3.5% per year. So it looks like ION Geophysical is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting ION Geophysical is moving incrementally towards profitability. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that ION Geophysical’s revenues are expected to grow faster than 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.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have analyst estimates for ION Geophysical going out as far as 2021, and you can see them free on our platform here.
It might also be worth considering whether ION Geophysical’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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