Analysts Have Just Cut Their Worley Limited (ASX:WOR) Revenue Estimates By 12%

The latest analyst coverage could presage a bad day for Worley Limited (ASX:WOR), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At AU$10.66, shares are up 4.7% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the latest downgrade, the ten analysts covering Worley provided consensus estimates of AU$9.5b revenue in 2021, which would reflect a stressful 27% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing AU$11b of revenue in 2021. The consensus view seems to have become more pessimistic on Worley, noting the measurable cut to revenue estimates in this update.

View our latest analysis for Worley

The consensus price target fell 8.4% to AU$11.36, with the analysts clearly less optimistic about Worley's valuation following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Worley analyst has a price target of AU$15.10 per share, while the most pessimistic values it at AU$9.20. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Worley shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Worley's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 27%, a significant reduction from annual growth of 5.8% 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 6.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Worley is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Worley going forwards.

Of course, this isn't the full story. We have estimates for Worley from its ten analysts out until 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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