2020 Bulkers Ltd. Just Beat Revenue Estimates By 112%

2020 Bulkers Ltd. (OB:2020) shareholders are probably feeling a little disappointed, since its shares fell 2.7% to kr141 in the week after its latest quarterly results. Revenue of US$39m came in a notable 112% ahead of expectations, while statutory earnings of US$1.36 were in line with what the analysts had been forecasting. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for 2020 Bulkers

Taking into account the latest results, the current consensus, from the six analysts covering 2020 Bulkers, is for revenues of US$73.7m in 2024. This implies a painful 39% reduction in 2020 Bulkers' revenue over the past 12 months. Statutory earnings per share are forecast to shrink 4.6% to US$3.32 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$86.3m and earnings per share (EPS) of US$3.10 in 2024. Indeed we can see that the consensus opinion has undergone some fundamental changes after the latest results, with a substantial drop in revenues at the same time as boosting EPS forecasts.

There's been no real change to the average price target of kr176, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. There are some variant perceptions on 2020 Bulkers, with the most bullish analyst valuing it at kr199 and the most bearish at kr119 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 63% by the end of 2024. This indicates a significant reduction from annual growth of 29% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - 2020 Bulkers is expected to lag the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards 2020 Bulkers following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, long term profitability is more important for the value creation process. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on 2020 Bulkers. Long-term earnings power is much more important than next year's profits. We have forecasts for 2020 Bulkers going out to 2026, and you can see them free on our platform here.

Plus, you should also learn about the 3 warning signs we've spotted with 2020 Bulkers (including 1 which makes us a bit uncomfortable) .

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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.