RPC, Inc. (NYSE:RES) investors will be delighted, with the company turning in some strong numbers with its latest results. Sales crushed expectations at US$117m, beating expectations by 21%. RPC reported a statutory loss of US$0.08 per share, which - although not amazing - was much smaller than the analysts predicted. Following the result, the 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the consensus from RPC's 15 analysts is for revenues of US$511.3m in 2021, which would reflect a sizeable 25% decline in sales compared to the last year of performance. The loss per share is expected to greatly reduce in the near future, narrowing 75% to US$0.26. Before this earnings announcement, the analysts had been modelling revenues of US$491.7m and losses of US$0.24 per share in 2021. Overall it looks as though the analysts were a bit mixed on the latest consensus updates. Although there was a nice uplift to revenue, the consensus also made a to its losses per share forecasts.
The consensus price target stayed unchanged at US$2.74, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic RPC analyst has a price target of US$4.25 per share, while the most pessimistic values it at US$1.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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 25%, a significant reduction from annual growth of 1.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - RPC is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at US$2.74, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on RPC. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple RPC analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - RPC has 1 warning sign we think you should be aware of.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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