Some California Resources Corporation (NYSE:CRC) Analysts Just Made A Major Cut To Next Year's Estimates
Today is shaping up negative for California Resources Corporation (NYSE:CRC) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from California Resources' three analysts is for revenues of US$1.8b in 2020, which would reflect a sizeable 35% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$12.76 per share. However, before this estimates update, the consensus had been expecting revenues of US$2.1b and US$5.29 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Check out our latest analysis for California Resources
The consensus price target lifted 12% to US$12.83, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on California Resources, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$1.50 per share. We would probably assign less value to the 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 rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the California Resources' past performance and to peers in the same industry. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to decline 0.3% next year. While this is interesting, California Resources', revenues are still expected to shrink next year, and 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 cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of California Resources.
That said, the analysts might have good reason to be negative on California Resources, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 4 other risks we've identified.
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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