The investors in Scorpio Bulkers Inc.'s (NYSE:SALT) will be rubbing their hands together with glee today, after the share price leapt 21% to US$14.16 in the week following its second-quarter results. Revenues came in at US$26m, in line with expectations, while statutory losses per share were substantially higher than expected, at US$5.73 per share. 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.
After the latest results, the consensus from Scorpio Bulkers' five analysts is for revenues of US$167.1m in 2020, which would reflect an uneasy 12% decline in sales compared to the last year of performance. Losses are forecast to narrow 5.9% to US$20.69 per share. Before this latest report, the consensus had been expecting revenues of US$166.5m and US$20.65 per share in losses.
The analysts trimmed their valuations, with the average price target falling 6.6% to US$30.43, with the ongoing losses seemingly weighing on sentiment, despite no real changes to the earnings forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Scorpio Bulkers, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$15.00 per share. We would probably assign less value to the analyst 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 the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 12%, a significant reduction from annual growth of 29% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.6% next year. 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 reconfirmed their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Scorpio Bulkers' revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Scorpio Bulkers' future valuation.
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 estimates - from multiple Scorpio Bulkers analysts - going out to 2022, and you can see them free on our platform here.
Even so, be aware that Scorpio Bulkers is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...
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