Stock Analysis

Analysts Are Updating Their Talos Energy Inc. (NYSE:TALO) Estimates After Its Yearly Results

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A week ago, Talos Energy Inc. (NYSE:TALO) came out with a strong set of yearly numbers that could potentially lead to a re-rate of the stock. Sales crushed expectations at US$1.2b, beating expectations by 20%. Talos Energy reported a statutory loss of US$2.24 per share, which - although not amazing - was much smaller than the analysts predicted. 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.

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NYSE:TALO Earnings and Revenue Growth February 27th 2022

Taking into account the latest results, Talos Energy's six analysts currently expect revenues in 2022 to be US$1.23b, approximately in line with the last 12 months. Earnings are expected to improve, with Talos Energy forecast to report a statutory profit of US$1.88 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.21b and earnings per share (EPS) of US$1.88 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The analysts reconfirmed their price target of US$18.58, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Talos Energy at US$25.00 per share, while the most bearish prices it at US$12.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. We would highlight that sales are expected to reverse, with a forecast 1.3% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Talos Energy is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$18.58, 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 Talos Energy going out to 2024, and you can see them free on our platform here.

Even so, be aware that Talos Energy is showing 1 warning sign in our investment analysis , you should know about...

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