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Today is shaping up negative for Pharos Energy plc (LON:PHAR) 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 analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from four analysts covering Pharos Energy is for revenues of US$115m in 2025, implying a chunky 16% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to crater 68% to US$0.019 in the same period. Previously, the analysts had been modelling revenues of US$132m and earnings per share (EPS) of US$0.057 in 2025. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
View our latest analysis for Pharos Energy
Despite the cuts to forecast earnings, there was no real change to the US$0.60 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Pharos Energy, with the most bullish analyst valuing it at US$0.76 and the most bearish at US$0.27 per share. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past five years, revenues have declined around 1.2% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 16% decline in revenue until the end of 2025. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 0.1% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Pharos Energy to suffer worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Pharos Energy. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Pharos Energy after the downgrade.