Today is shaping up negative for Continental Resources, Inc. (NYSE:CLR) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the 17 analysts covering Continental Resources, is for revenues of US$2.8b in 2020, which would reflect a painful 33% reduction in Continental Resources' 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$0.88 per share in 2020. Before this latest update, the analysts had been forecasting revenues of US$3.3b and earnings per share (EPS) of US$0.12 in 2020. So we can see that the consensus has become notably more bearish on Continental Resources' outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target fell 29% to US$15.40, implicitly signalling that lower earnings per share are a leading indicator for Continental Resources' valuation. 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. There are some variant perceptions on Continental Resources, with the most bullish analyst valuing it at US$62.00 and the most bearish at US$3.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 33%, a significant reduction from annual growth of 8.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 0.3% annually for the foreseeable future. So it's pretty clear that Continental Resources' revenues are expected to shrink faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Continental Resources to become unprofitable this year. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Continental Resources revenue is expected to perform worse than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Continental Resources.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Continental Resources, including a weak balance sheet. For more information, you can click here to discover this and the 3 other flags we've identified.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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