Earnings Miss: Tethys Oil AB (publ) Missed EPS And Analysts Are Revising Their Forecasts

It's been a mediocre week for Tethys Oil AB (publ) (STO:TETY) shareholders, with the stock dropping 13% to kr35.53 in the week since its latest annual results. Things were not great overall, with a surprise (statutory) loss of US$0.51 per share on revenues of US$138m, even though the analyst had been expecting a profit. Following the result, the analyst has 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. So we collected the latest post-earnings statutory consensus estimate to see what could be in store for next year.

See our latest analysis for Tethys Oil

Taking into account the latest results, the current consensus, from the single analyst covering Tethys Oil, is for revenues of US$128.4m in 2024. This implies a small 7.1% reduction in Tethys Oil's revenue over the past 12 months. Tethys Oil is also expected to turn profitable, with statutory earnings of US$1.10 per share. Before this earnings report, the analyst had been forecasting revenues of US$135.1m and earnings per share (EPS) of US$1.27 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.

The average price target climbed 7.0% to kr86.03despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Tethys Oil's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Tethys Oil's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 7.1% to the end of 2024. This tops off a historical decline of 1.2% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to decline 1.6% annually. So it's pretty clear that Tethys Oil revenue is expected to decline at a faster rate than the wider industry.

The Bottom Line

The biggest concern is that the analyst reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Tethys Oil. Unfortunately they also cut their revenue estimates for next year. Forecasts imply the business' revenue is expected to perform worse than the wider industry. That said, earnings per share are more important for creating value for shareholders. There was also a nice increase in the price target, with the analyst clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2025, which can be seen for free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Tethys Oil that 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.