There's been a major selloff in Scorpio Bulkers Inc. (NYSE:SALT) shares in the week since it released its quarterly report, with the stock down 21% to US$11.18. The results don't look great, especially considering that statutory losses grew 117% toUS$3.12 per share. Revenues of US$47m did beat expectations by 3.7%, but it looks like a bit of a cold comfort. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, Scorpio Bulkers' six analysts currently expect revenues in 2021 to be US$173.6m, approximately in line with the last 12 months. Statutory losses are forecast to balloon 94% to US$0.99 per share. In the lead-up to this report, the analysts had been modelling revenues of US$204.3m and earnings per share (EPS) of US$0.12 in 2021. So we can see that the consensus has become notably more bearish on Scorpio Bulkers' outlook following these results, with a substantial drop in next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous calls for a profit.
There was no major change to the consensus price target of US$28.71, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Scorpio Bulkers at US$50.00 per share, while the most bearish prices it at US$15.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.2%, a significant reduction from annual growth of 25% 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 3.6% annually for the foreseeable future. It's pretty clear that Scorpio Bulkers' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Scorpio Bulkers to become unprofitable next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Scorpio Bulkers. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Scorpio Bulkers analysts - going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 4 warning signs for Scorpio Bulkers (of which 1 is potentially serious!) you should know about.
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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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