Yahoo Finance Aker BP ASA (OB:AKERBP) Analysts Just Slashed This Year's Estimates
Today is shaping up negative for Aker BP ASA (OB:AKERBP) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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 20 analysts covering Aker BP is for revenues of US$2.7b in 2020, implying a chunky 16% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 82% to US$0.10. Before this latest update, the analysts had been forecasting revenues of US$3.3b and earnings per share (EPS) of US$0.62 in 2020. So we can see that the consensus has become notably more bearish on Aker BP's outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
See our latest analysis for Aker BP
There was no major change to the consensus price target of kr231, 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 Aker BP at kr392 per share, while the most bearish prices it at kr130. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, 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 11% next year. It's pretty clear that Aker BP's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Aker BP to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Aker BP's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Aker BP.
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 Aker BP's business, like the risk of cutting its dividend. Learn more, and discover the 1 other flag we've identified, for 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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