Time To Worry? Analysts Just Downgraded Their 2020 Bulkers Ltd. (OB:2020) Outlook

The analysts covering 2020 Bulkers Ltd. (OB:2020) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. At kr130, shares are up 5.8% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the five analysts covering 2020 Bulkers provided consensus estimates of US$59m revenue in 2025, which would reflect a painful 48% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 57% to US$1.43 in the same period. Prior to this update, the analysts had been forecasting revenues of US$69m and earnings per share (EPS) of US$1.56 in 2025. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

View our latest analysis for 2020 Bulkers

Despite the cuts to forecast earnings, there was no real change to the US$14.55 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values 2020 Bulkers at US$17.43 per share, while the most bearish prices it at US$11.08. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the 2020 Bulkers' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 48% by the end of 2025. This indicates a significant reduction from annual growth of 21% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 0.7% per year. So it's pretty clear that 2020 Bulkers' revenues are expected to shrink faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for 2020 Bulkers. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. Given the stark change in sentiment, we'd understand if investors became more cautious on 2020 Bulkers after today.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with 2020 Bulkers' financials, such as a weak balance sheet. For more information, you can click here to discover this and the 2 other risks we've identified.

We also provide an overview of the 2020 Bulkers Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.