Earnings Miss: Subsea 7 S.A. Missed EPS By 80% And Analysts Are Revising Their Forecasts

It's been a pretty great week for Subsea 7 S.A. (OB:SUBC) shareholders, with its shares surging 12% to kr159 in the week since its latest yearly results. It looks like a pretty bad result, all things considered. Although revenues of US$6.0b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 80% to hit US$0.05 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the 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 the analysts have changed their mind on Subsea 7 after the latest results.

View our latest analysis for Subsea 7

Taking into account the latest results, the consensus forecast from Subsea 7's 16 analysts is for revenues of US$6.42b in 2024. This reflects a satisfactory 7.4% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 1,561% to US$0.85. Before this earnings report, the analysts had been forecasting revenues of US$6.41b and earnings per share (EPS) of US$0.89 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

The consensus price target held steady at kr174, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Subsea 7 analyst has a price target of kr200 per share, while the most pessimistic values it at kr107. 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. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Subsea 7's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Subsea 7's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 7.4% growth on an annualised basis. This is compared to a historical growth rate of 10% over the past five years. Compare this to the 35 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 7.7% per year. So it's pretty clear that, while Subsea 7's revenue growth is expected to slow, it's expected to grow roughly in line with the 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. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at kr174, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Subsea 7 going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Subsea 7 , and understanding them should be part of your investment process.

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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.