Shareholders in Frontline plc (NYSE:FRO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Frontline will make substantially more sales than they’d previously expected.
Following the upgrade, the consensus from six analysts covering Frontline is for revenues of US$1.2b in 2023, implying a sizeable 30% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to shrink 2.6% to US$2.83 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$2.59 in 2023. The most recent forecasts are noticeably more optimistic, with a decent improvement in revenue estimates and a lift to earnings per share as well.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$17.63, suggesting that the forecast performance does not have a long term impact on the company’s 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. There are some variant perceptions on Frontline, with the most bullish analyst valuing it at US$22.00 and the most bearish at US$12.50 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Frontline shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Frontline’s past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 38% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 11% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 3.5% per year. The forecasts do look bearish for Frontline, since they’re expecting it to shrink faster than the industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates, with sales apparently performing well even though revenue growth expected to decline against the wider market this year. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Frontline.
Analysts are definitely bullish on Frontline, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 3 other risks we’ve identified .
We also provide an overview of the Frontline Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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