The investors in Liberty Oilfield Services Inc.‘s (NYSE:LBRT) will be rubbing their hands together with glee today, after the share price leapt 32% to US$4.72 in the week following its quarterly results. It was a solid earnings report, with revenues and earnings both coming in very strong. Revenues were 15% higher than the analysts had forecast, at US$472m, while the company also delivered a surprise statutory profit, against analyst expectations of a loss. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for Liberty Oilfield Services
Taking into account the latest results, the 14 analysts covering Liberty Oilfield Services provided consensus estimates of US$940.8m revenue in 2020, which would reflect a sizeable 51% decline on its sales over the past 12 months. The company is forecast to report a statutory loss of US$1.16 in 2020, a sharp decline from a profit over the last year. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$1.01b and losses of US$0.93 per share in 2020. While this year’s revenue estimates dropped there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The average price target lifted 7.6% to US$5.27, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Liberty Oilfield Services analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$3.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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 51%, a significant reduction from annual growth of 26% over the last three years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.5% next year. The forecasts do look bearish for Liberty Oilfield Services, since they’re expecting it to shrink faster than the industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Liberty Oilfield Services. Unfortunately they also cut their revenue estimates for next year, and forecasts imply the business’ revenues are expected to perform worse than the wider industry. That said, earnings per share are more important for creating value for shareholders. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on Liberty Oilfield Services. Long-term earnings power is much more important than next year’s profits. We have forecasts for Liberty Oilfield Services going out to 2024, and you can see them free on our platform here.
We don’t want to rain on the parade too much, but we did also find 3 warning signs for Liberty Oilfield Services that you need to be mindful of.
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