Analysts Just Slashed Their SilverBow Resources, Inc. (NYSE:SBOW) EPS Numbers

The analysts covering SilverBow Resources, Inc. (NYSE:SBOW) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this 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 18% to US$29.38 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

After this downgrade, SilverBow Resources' three analysts are now forecasting revenues of US$794m in 2023. This would be a modest 5.4% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to decline 13% to US$13.23 in the same period. Before this latest update, the analysts had been forecasting revenues of US$927m and earnings per share (EPS) of US$14.85 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.

View our latest analysis for SilverBow Resources

Analysts made no major changes to their price target of US$51.25, suggesting the downgrades are not expected to have a long-term impact on SilverBow Resources' valuation. 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 SilverBow Resources at US$70.00 per share, while the most bearish prices it at US$37.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that SilverBow Resources' revenue growth is expected to slow, with the forecast 5.4% annualised growth rate until the end of 2023 being well below the historical 24% p.a. growth over the last five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 6.4% annually. Factoring in the forecast slowdown in growth, it's pretty clear that SilverBow Resources is still expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. 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. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on SilverBow Resources after the downgrade.

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 SilverBow Resources' 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.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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.