Yahoo Finance Analysts Have Lowered Expectations For Tullow Oil plc After Its Latest Results
One of the biggest stories of last week was how Tullow Oil plc (LON:TLW) shares plunged 53% in the week since its latest yearly results, closing yesterday at UK£0.11. Results look to have been somewhat negative - revenue fell 7.5% short of analyst estimates at US$1.7b, although statutory losses were somewhat better. The per-share loss was US$1.21, 84% smaller than analysts were expecting prior to the result. 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
See our latest analysis for Tullow Oil
After the latest results, the consensus from Tullow Oil's 15 analysts is for revenues of US$1.43b in 2020, which would reflect a not inconsiderable 15% decline in sales compared to the last year of performance. Tullow Oil is also expected to turn profitable, with statutory earnings of US$0.025 per share. Before this earnings report, analysts had been forecasting revenues of US$1.53b and earnings per share (EPS) of US$0.065 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share forecasts.
It'll come as no surprise then, to learn that analysts have cut their price target 15% to US$0.83. 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 Tullow Oil at US$2.41 per share, while the most bearish prices it at US$0.13. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Tullow Oil's performance in recent years. We would highlight that sales are expected to reverse, with the forecast 15% revenue decline a notable change from historical growth of 0.7% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.5% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Tullow Oil to grow slower 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. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Tullow Oil analysts - going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Tullow Oil's balance sheet, and whether we think Tullow Oil is carrying too much debt, for free on our platform here.
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