It's been a pretty great week for National Oilwell Varco, Inc. (NYSE:NOV) shareholders, with its shares surging 17% to US$24.18 in the week since its latest yearly results. Sales hit US$8.5b in line with forecasts, although the company reported a statutory loss per share of US$15.96 that was somewhat smaller than analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following last week's earnings report, National Oilwell Varco's 20 analysts are forecasting 2020 revenues to be US$8.56b, approximately in line with the last 12 months. National Oilwell Varco is also expected to turn profitable, with statutory earnings of US$0.76 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$8.56b and earnings per share (EPS) of US$0.81 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$26.82, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values National Oilwell Varco at US$33.00 per share, while the most bearish prices it at US$20.00. 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.
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. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, National Oilwell Varco's sales have shrunk approximately 23% annually 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 revenue grow 3.5% per year. Although National Oilwell Varco's revenues are expected to improve, it seems that analysts are still expecting it 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. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$26.82, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple National Oilwell Varco analysts - going out to 2023, and you can see them free on our platform here.
You can also view our analysis of National Oilwell Varco's balance sheet, and whether we think National Oilwell Varco is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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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