Earnings Release: Here's Why Analysts Cut Their Noble Corporation plc Price Target To US$1.13
Noble Corporation plc (NYSE:NE) shares fell 5.3% to US$0.90 in the week since its latest annual results. Noble beat revenue forecasts by a solid 17%, hitting US$1.3b, but it also saw a corresponding increase in statutory losses, which hit US$2.81, some -20% greater than analysts expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
See our latest analysis for Noble
Following the recent earnings report, the consensus from20 analysts covering Noble expects revenues of US$1.11b in 2020, implying a considerable 15% decline in sales compared to the last 12 months. Statutory losses are forecast to balloon 47% to US$1.48 per share. Before this earnings announcement, analysts had been forecasting revenues of US$1.12b and losses of US$1.48 per share in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the earnings per share expectations following these results.
As a result, it's unexpected to see that the consensus price target fell 16% to US$1.13, with analysts seemingly becoming more concerned about ongoing losses, despite making no major changes to their forecasts. 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 Noble at US$2.00 per share, while the most bearish prices it at US$0.10. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. One more thing stood out to us about these estimates, and it's that Noble's decline is expected to slow down, with revenues forecast to fall 15% next year, improving on a historical decline of 28% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline 3.6% per year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Noble to suffer less severely than the wider market.
The Bottom Line
The most important thing to note from these estimates is that the consensus increased its forecast losses next year, suggesting all may not be well at Noble. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Noble's revenues are expected to perform worse than the wider market. 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 in mind, we wouldn't be too quick to come to a conclusion on Noble. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Noble analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Noble's balance sheet, and whether we think Noble is carrying too much debt, for free on our platform here.
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