Stock Analysis

Hammond Power Solutions Inc. Just Missed Earnings - But Analysts Have Updated Their Models

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One of the biggest stories of last week was how Hammond Power Solutions Inc. (TSE:HPS.A) shares plunged 23% in the week since its latest first-quarter results, closing yesterday at CA$106. It looks like a pretty bad result, all things considered. Although revenues of CA$191m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 58% to hit CA$0.67 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Hammond Power Solutions

TSX:HPS.A Earnings and Revenue Growth May 3rd 2024

Taking into account the latest results, the current consensus from Hammond Power Solutions' three analysts is for revenues of CA$774.6m in 2024. This would reflect a satisfactory 6.2% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 22% to CA$5.68. Before this earnings report, the analysts had been forecasting revenues of CA$770.2m and earnings per share (EPS) of CA$6.13 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

Despite cutting their earnings forecasts,the analysts have lifted their price target 81% to CA$162, suggesting that these impacts are not expected to weigh on the stock's value in the long term. 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 Hammond Power Solutions, with the most bullish analyst valuing it at CA$167 and the most bearish at CA$156 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Hammond Power Solutions' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 8.3% growth on an annualised basis. This is compared to a historical growth rate of 18% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 23% per year. Factoring in the forecast slowdown in growth, it seems obvious that Hammond Power Solutions is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Hammond Power Solutions. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will 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. At Simply Wall St, we have a full range of analyst estimates for Hammond Power Solutions going out to 2026, and you can see them free on our platform here..

You can also see our analysis of Hammond Power Solutions' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

Valuation is complex, but we're helping make it simple.

Find out whether Hammond Power Solutions is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.