Yahoo Finance Things Look Grim For Whitecap Resources Inc. (TSE:WCP) After Today's Downgrade
The latest analyst coverage could presage a bad day for Whitecap Resources Inc. (TSE:WCP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 34% to CA$1.78 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the latest downgrade, the four analysts covering Whitecap Resources provided consensus estimates of CA$631m revenue in 2020, which would reflect a concerning 45% decline on its sales over the past 12 months. Losses are forecast to hold steady at around CA$5.49. Yet prior to the latest estimates, the analysts had been forecasting revenues of CA$1.1b and losses of CA$0.14 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
View our latest analysis for Whitecap Resources
There was no major change to the consensus price target of CA$2.56, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Whitecap Resources at CA$3.10 per share, while the most bearish prices it at CA$1.75. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 45% revenue decline a notable change from historical growth of 20% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.6% annually for the foreseeable future. It's pretty clear that Whitecap Resources' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Whitecap Resources' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Whitecap Resources.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Whitecap Resources, including the risk of cutting its dividend. Learn more, and discover the 2 other flags we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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.
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