The latest analyst coverage could presage a bad day for Star Bulk Carriers Corp. (NASDAQ:SBLK), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, the four analysts covering Star Bulk Carriers provided consensus estimates of US$670m revenue in 2023, which would reflect a painful 40% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to crater 38% to US$1.73 in the same period. Before this latest update, the analysts had been forecasting revenues of US$781m and earnings per share (EPS) of US$4.53 in 2023. 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.

See our latest analysis for Star Bulk Carriers

Despite the cuts to forecast earnings, there was no real change to the US$26.50 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Star Bulk Carriers at US$30.00 per share, while the most bearish prices it at US$20.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Star Bulk Carriers' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 64% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 21% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 3.5% annually for the foreseeable future. The forecasts do look bearish for Star Bulk Carriers, since they're expecting it to shrink faster than the 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 Star Bulk Carriers. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. 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 Star Bulk Carriers after the downgrade.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Star Bulk Carriers, including its declining profit margins. Learn more, and discover the 1 other risk we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.