Analysts Just Slashed Their Eneti Inc. (NYSE:NETI) Earnings Forecasts

The analysts covering Eneti Inc. (NYSE:NETI) 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the four analysts covering Eneti provided consensus estimates of US$116m revenue in 2022, which would reflect a concerning 36% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 95% to US$0.55. Previously, the analysts had been modelling revenues of US$133m and earnings per share (EPS) of US$0.87 in 2022. There looks to have been a major change in sentiment regarding Eneti's prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for Eneti

The consensus price target fell 11% to US$14.71, implicitly signalling that lower earnings per share are a leading indicator for Eneti's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Eneti at US$28.00 per share, while the most bearish prices it at US$10.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 36% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 10% 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 1.9% annually for the foreseeable future. The forecasts do look bearish for Eneti, since they're expecting it to shrink faster than the industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Eneti to become unprofitable this year. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Eneti revenue is expected to perform worse than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Eneti's business, like major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 1 other flag we've identified.

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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.