Industry Analysts Just Upgraded Their Subsea 7 S.A. (OB:SUBC) Revenue Forecasts By 11%

Shareholders in Subsea 7 S.A. (OB:SUBC) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investors have been pretty optimistic on Subsea 7 too, with the stock up 17% to kr71.20 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

After the upgrade, the 17 analysts covering Subsea 7 are now predicting revenues of US$5.1b in 2022. If met, this would reflect a reasonable 2.6% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 119% to US$0.24. Prior to this update, the analysts had been forecasting revenues of US$4.6b and earnings per share (EPS) of US$0.22 in 2022. The forecasts seem more optimistic now, with a substantial gain in revenue and a slight bump in earnings per share estimates.

View our latest analysis for Subsea 7

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$10.48, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. Currently, the most bullish analyst values Subsea 7 at US$112 per share, while the most bearish prices it at US$69.78. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Subsea 7's growth to accelerate, with the forecast 2.6% annualised growth to the end of 2022 ranking favourably alongside historical growth of 1.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 4.9% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Subsea 7 is expected to grow slower than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than 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 Subsea 7.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Subsea 7 analysts - going out to 2024, 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.