Arabian Drilling Company (TADAWUL:2381) Consensus Forecasts Have Become A Little Darker Since Its Latest Report

Shareholders might have noticed that Arabian Drilling Company (TADAWUL:2381) filed its second-quarter result this time last week. The early response was not positive, with shares down 7.6% to ر.س118 in the past week. It was a credible result overall, with revenues of ر.س939m and statutory earnings per share of ر.س6.79 both in line with analyst estimates, showing that Arabian Drilling is executing in line with expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Arabian Drilling

Taking into account the latest results, the nine analysts covering Arabian Drilling provided consensus estimates of ر.س3.65b revenue in 2024, which would reflect a discernible 4.4% decline over the past 12 months. Statutory earnings per share are predicted to rise 5.0% to ر.س5.77. In the lead-up to this report, the analysts had been modelling revenues of ر.س3.87b and earnings per share (EPS) of ر.س7.41 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a pretty serious reduction to earnings per share numbers.

The analysts made no major changes to their price target of ر.س152, suggesting the downgrades are not expected to have a long-term impact on Arabian Drilling's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Arabian Drilling, with the most bullish analyst valuing it at ر.س190 and the most bearish at ر.س135 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Arabian Drilling shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 8.6% by the end of 2024. This indicates a significant reduction from annual growth of 26% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Arabian Drilling is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Arabian Drilling. 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. The consensus price target held steady at ر.س152, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Arabian Drilling going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Arabian Drilling you should be aware of.

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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.