Archrock, Inc. Just Beat EPS By 30%: Here's What Analysts Think Will Happen Next
Last week, you might have seen that Archrock, Inc. (NYSE:AROC) released its annual result to the market. The early response was not positive, with shares down 2.7% to US$8.24 in the past week. It looks like a credible result overall - although revenues of US$965m were what analysts expected, Archrock surprised by delivering a (statutory) profit of US$0.70 per share, an impressive 30% above what analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
See our latest analysis for Archrock
Following the latest results, Archrock's one analyst are now forecasting revenues of US$1.03b in 2020. This would be a credible 6.2% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$0.70, roughly flat on the last 12 months. In the lead-up to this report, analysts had been modelling revenues of US$1.08b and earnings per share (EPS) of US$0.75 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a small dip in earnings per share estimates.
Analysts made no major changes to their price target of US$14.05, suggesting the downgrades are not expected to have a long-term impact on Archrock's valuation.
In addition, we can look to Archrock's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Archrock's revenue growth will slow down substantially, with revenues next year expected to grow 6.2%, compared to a historical growth rate of 12% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 3.6% next year. So it's pretty clear that, while Archrock's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Archrock. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Archrock's revenues are expected to grow faster than the wider market. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Archrock. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
You can also view our analysis of Archrock's balance sheet, and whether we think Archrock is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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