Shareholders in Genco Shipping & Trading Limited (NYSE:GNK) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
After the upgrade, the consensus from Genco Shipping & Trading's four analysts is for revenues of US$320m in 2021, which would reflect an uneasy 18% decline in sales compared to the last year of performance. Losses are expected to turn into profits real soon, with the analysts forecasting US$3.12 in per-share earnings. Prior to this update, the analysts had been forecasting revenues of US$284m and earnings per share (EPS) of US$2.64 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$24.60, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Genco Shipping & Trading at US$28.00 per share, while the most bearish prices it at US$19.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 33% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 21% 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 4.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Genco Shipping & Trading is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Genco Shipping & Trading could be a good candidate for more research.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Genco Shipping & Trading analysts - going out to 2023, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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What are the risks and opportunities for Genco Shipping & Trading?
Trading at 73.1% below our estimate of its fair value
Earnings are forecast to grow 7.63% per year
Profit margins (18.7%) are lower than last year (38.7%)
This article by Simply Wall St is general in nature. 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.
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