Stock Analysis

Analysts' Revenue Estimates For TORM plc (CPH:TRMD A) Are Surging Higher

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Celebrations may be in order for TORM plc (CPH:TRMD A) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts have sharply increased their revenue numbers, with a view that TORM will make substantially more sales than they'd previously expected.

Following the latest upgrade, the three analysts covering TORM provided consensus estimates of US$1.1b revenue in 2023, which would reflect a definite 11% decline on its sales over the past 12 months. Per-share earnings are expected to soar 49% to US$5.92. Prior to this update, the analysts had been forecasting revenues of US$742m and earnings per share (EPS) of US$5.76 in 2023. Sentiment certainly seems to have improved in recent times, with a very substantial lift in revenue and a small increase to earnings per share estimates.

Check out our latest analysis for TORM

CPSE:TRMD A Earnings and Revenue Growth March 15th 2023

Despite these upgrades, the analysts have not made any major changes to their price target of US$34.38, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values TORM at US$247 per share, while the most bearish prices it at US$233. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 8.8% by the end of 2023. This indicates a significant reduction from annual growth of 5.5% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 7.3% per year.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Fortunately analysts also upgraded their revenue estimates, with sales performing well and TORM's revenues performing in line with the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at TORM.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential warning signs with TORM, including a weak balance sheet. You can learn more, and discover the 3 other warning signs we've identified, for free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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