Analyst Forecasts Just Got A Lot More Bearish On EuroDry Ltd. (NASDAQ:EDRY)

Market forces rained on the parade of EuroDry Ltd. (NASDAQ:EDRY) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the consensus from dual analysts covering EuroDry is for revenues of US$47m in 2023, implying a chunky 11% decline in sales compared to the last 12 months. After this downgrade, the company is anticipated to report a loss of US$2.45 in 2023, a sharp decline from a profit over the last year. Previously, the analysts had been modelling revenues of US$62m and earnings per share (EPS) of US$1.31 in 2023. So we can see that the consensus has become notably more bearish on EuroDry's outlook with these numbers, making a sizeable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

Check out our latest analysis for EuroDry

The consensus price target fell 6.0% to US$23.50, implicitly signalling that lower earnings per share are a leading indicator for EuroDry's valuation.

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. We would highlight that sales are expected to reverse, with a forecast 21% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 28% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 3.2% annually for the foreseeable future. So it's pretty clear that EuroDry's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting EuroDry to become unprofitable this year. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of EuroDry.

There might be good reason for analyst bearishness towards EuroDry, like its declining profit margins. For more information, you can click here to discover this and the 3 other flags we've identified.

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.

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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.