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NOW Inc. Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

As you might know, NOW Inc. (NYSE:DNOW) recently reported its annual numbers. Revenues came in at US$3.0b, in line with estimates, while NOW reported a statutory loss of US$0.89 per share, well short of prior analyst forecasts for a profit. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for NOW

NYSE:DNOW Past and Future Earnings, February 21st 2020
NYSE:DNOW Past and Future Earnings, February 21st 2020

Taking into account the latest results, the current consensus, from the ten analysts covering NOW, is for revenues of US$2.60b in 2020, which would reflect a definite 12% reduction in NOW's sales over the past 12 months. NOW is also expected to turn profitable, with statutory earnings of US$0.10 per share. In the lead-up to this report, analysts had been modelling revenues of US$2.86b and earnings per share (EPS) of US$0.33 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.

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The consensus price target fell 14% to US$11.28, with the weaker earnings outlook clearly leading analyst valuation estimates. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic NOW analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$8.25. 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.

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. One thing that stands out from these estimates is that, even though revenues are forecast to keep falling, the decline is expected to accelerate. Analysts have modelled a 12% decline next year, compared to a historical decline of 3.1% per annum for the past five years. Compare this with our data on other companies (with analyst coverage) in a similar industry, which in aggregate are forecast to see their revenue decline 4.4% per year. So it looks like NOW is also expected to see its revenues decline at a faster rate than the wider market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of NOW's future valuation.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for NOW going out to 2024, and you can see them free on our platform here..

You can also see our analysis of NOW's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.