Yahoo Finance Earnings Miss: STEP Energy Services Ltd. Missed EPS By 14% And Analysts Are Revising Their Forecasts
One of the biggest stories of last week was how STEP Energy Services Ltd. (TSE:STEP) shares plunged 23% in the week since its latest full-year results, closing yesterday at CA$3.48. It was not a great result overall. While revenues of CA$946m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 14% to hit CA$0.67 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for STEP Energy Services
Following the latest results, STEP Energy Services' eight analysts are now forecasting revenues of CA$1.00b in 2024. This would be a credible 6.1% improvement in revenue compared to the last 12 months. Per-share earnings are expected to surge 37% to CA$0.96. In the lead-up to this report, the analysts had been modelling revenues of CA$1.07b and earnings per share (EPS) of CA$1.12 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a substantial drop in earnings per share numbers.
The consensus price target fell 16% to CA$5.72, with the weaker earnings outlook clearly leading valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic STEP Energy Services analyst has a price target of CA$7.50 per share, while the most pessimistic values it at CA$4.50. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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 STEP Energy Services' revenue growth is expected to slow, with the forecast 6.1% annualised growth rate until the end of 2024 being well below the historical 9.5% p.a. growth over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 10% per year. So it's clear that despite the slowdown in growth, STEP Energy Services is still expected to grow meaningfully faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for STEP Energy Services. Unfortunately, they also downgraded their revenue estimates, and our data indicates that is expected to perform better than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of STEP Energy Services' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on STEP Energy Services. Long-term earnings power is much more important than next year's profits. We have forecasts for STEP Energy Services going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for STEP Energy Services you should be aware of.
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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.
