Last week saw the newest full-year earnings release from Parsley Energy, Inc. (NYSE:PE), an important milestone in the company's journey to build a stronger business. It looks like a pretty bad result, all things considered. Although revenues of US$2.0b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 42% to hit US$0.63 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the 20 analysts covering Parsley Energy are now predicting revenues of US$2.93b in 2020. If met, this would reflect a major 50% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to bounce 156% to US$1.60. In the lead-up to this report, analysts had been modelling revenues of US$2.94b and earnings per share (EPS) of US$1.68 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$24.51, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Parsley Energy at US$32.00 per share, while the most bearish prices it at US$18.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Further, we can compare these estimates to past performance, and see how Parsley Energy forecasts compare to the wider market's forecast performance. Next year brings more of the same, according to analysts, with revenue forecast to grow 50%, in line with its 44% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 4.4% per year. So although Parsley Energy is expected to maintain its revenue growth rate, it's definitely expected to grow faster 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. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Parsley Energy's revenues are expected to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Parsley Energy going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Parsley Energy's balance sheet, and whether we think Parsley Energy is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.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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