Yahoo Finance The Consensus EPS Estimates For ProPetro Holding Corp. (NYSE:PUMP) Just Fell Dramatically
The latest analyst coverage could presage a bad day for ProPetro Holding Corp. (NYSE:PUMP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of US$6.36 reflecting a 27% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the latest downgrade, the 18 analysts covering ProPetro Holding provided consensus estimates of US$754m revenue in 2020, which would reflect a stressful 60% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.82 per share in 2020. Yet before this consensus update, the analysts had been forecasting revenues of US$850m and losses of US$0.64 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for ProPetro Holding
Analysts lifted their price target 9.6% to US$5.62, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. There are some variant perceptions on ProPetro Holding, with the most bullish analyst valuing it at US$8.00 and the most bearish at US$3.80 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. We would highlight that sales are expected to reverse, with the forecast 60% revenue decline a notable change from historical growth of 37% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.7% annually for the foreseeable future. It's pretty clear that ProPetro Holding's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at ProPetro Holding. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of ProPetro Holding.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple ProPetro Holding analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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