Stolt-Nielsen Limited (OB:SNI) Analysts Just Cut Their EPS Forecasts Substantially

Market forces rained on the parade of Stolt-Nielsen Limited (OB:SNI) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 11% to kr237 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the latest downgrade, Stolt-Nielsen's four analysts currently expect revenues in 2023 to be US$2.5b, approximately in line with the last 12 months. Statutory earnings per share are presumed to shoot up 30% to US$4.36. Previously, the analysts had been modelling revenues of US$2.8b and earnings per share (EPS) of US$4.91 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for Stolt-Nielsen

Analysts made no major changes to their price target of US$28.57, suggesting the downgrades are not expected to have a long-term impact on Stolt-Nielsen's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Stolt-Nielsen at US$315 per share, while the most bearish prices it at US$265. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Stolt-Nielsen's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 1.1% growth on an annualised basis. This is compared to a historical growth rate of 1.7% over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 1.6% annually. Factoring in the forecast slowdown in growth, it's pretty clear that Stolt-Nielsen is still expected to grow 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 Stolt-Nielsen. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of Stolt-Nielsen.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Stolt-Nielsen 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.