Apache Corporation (NASDAQ:APA) investors will be delighted, with the company turning in some strong numbers with its latest results. Apache outperformed on both revenues and the expected loss per share, with revenues of US$1.1b beating estimates by 15%. Statutory losses were US$0.01, 97% smaller thanthe analysts expected. 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.
Taking into account the latest results, the current consensus, from the 19 analysts covering Apache, is for revenues of US$4.32b in 2021, which would reflect a small 7.6% reduction in Apache's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 99% to US$0.19. Before this earnings announcement, the analysts had been modelling revenues of US$4.32b and losses of US$0.19 per share in 2021. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.
There's been no major changes to the consensus price target of US$15.12, suggesting that reduced loss estimates are not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Apache at US$23.00 per share, while the most bearish prices it at US$10.00. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 0.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 7.6% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 11% next year. So while a broad number of companies are forecast to decline, unfortunately Apache is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Apache going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Apache that we have uncovered.
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