Today is shaping up negative for Trican Well Service Ltd. (TSE:TCW) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At CA$0.66, shares are up 6.5% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the latest downgrade, the twelve analysts covering Trican Well Service provided consensus estimates of CA$368m revenue in 2020, which would reflect a stressful 38% decline on its sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching CA$0.88. Yet before this consensus update, the analysts had been forecasting revenues of CA$421m and losses of CA$0.28 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.
There was no major change to the consensus price target of CA$0.82, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Trican Well Service, with the most bullish analyst valuing it at CA$1.00 and the most bearish at CA$0.60 per share. This shows there is still some 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to decline 3.5% next year. So it's pretty clear that Trican Well Service sales are expected to decline at a faster rate 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 they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Trican Well Service revenue is expected to perform worse than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Trican Well Service after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Trican Well Service going out to 2022, and you can see them 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.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.