Petrofac Limited (LON:PFC) Just Reported And Analysts Have Been Lifting Their Price Targets

The investors in Petrofac Limited's (LON:PFC) will be rubbing their hands together with glee today, after the share price leapt 29% to UK£0.14 in the week following its annual results. It was a pretty bad result overall; while revenues were in line with expectations at US$2.5b, statutory losses exploded to US$0.97 per share. The 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Petrofac

After the latest results, the seven analysts covering Petrofac are now predicting revenues of US$3.36b in 2024. If met, this would reflect a major 35% improvement in revenue compared to the last 12 months. Petrofac is also expected to turn profitable, with statutory earnings of US$0.029 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.32b and earnings per share (EPS) of US$0.043 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 8.8% to UK£0.54, suggesting the revised estimates are not indicative of a weaker long-term future for the business. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Petrofac, with the most bullish analyst valuing it at UK£1.00 and the most bearish at UK£0.098 per share. 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 a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Petrofac's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 35% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 21% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 2.1% annually. Not only are Petrofac's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Petrofac analysts - going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Petrofac you should be aware of, and 2 of them don't sit too well with us.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.