Investors in Herc Holdings Inc. (NYSE:HRI) had a good week, as its shares rose 5.8% to close at US$36.17 following the release of its quarterly results. Although revenues of US$368m were in line with analyst expectations, Herc Holdings surprised on the earnings front, with an unexpected (statutory) profit of US$0.07 per share a nice improvement on the losses that the analystsforecast. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the seven analysts covering Herc Holdings provided consensus estimates of US$1.70b revenue in 2020, which would reflect an uncomfortable 8.2% decline on its sales over the past 12 months. Statutory earnings per share are expected to sink 13% to US$1.29 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.68b and earnings per share (EPS) of US$0.74 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the considerable lift to earnings per share expectations following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 18% to US$44.75. 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 Herc Holdings analyst has a price target of US$51.00 per share, while the most pessimistic values it at US$40.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Herc Holdings is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Herc Holdings’ past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 8.2%, a significant reduction from annual growth of 5.7% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.9% next year. It’s pretty clear that Herc Holdings’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Herc Holdings following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Herc Holdings’ revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple Herc Holdings analysts – going out to 2022, and you can see them free on our platform here.
Even so, be aware that Herc Holdings is showing 5 warning signs in our investment analysis , and 1 of those doesn’t sit too well with us…
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