Stock Analysis

Results: Hammond Power Solutions Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

TSX:HPS.A
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Hammond Power Solutions Inc. (TSE:HPS.A) investors will be delighted, with the company turning in some strong numbers with its latest results. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 17% higher than the analysts had forecast, at CA$128m, while EPS were CA$0.72 beating analyst models by 64%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Hammond Power Solutions after the latest results.

See our latest analysis for Hammond Power Solutions

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TSX:HPS.A Earnings and Revenue Growth May 6th 2022

Taking into account the latest results, the most recent consensus for Hammond Power Solutions from two analysts is for revenues of CA$459.7m in 2022 which, if met, would be a credible 7.4% increase on its sales over the past 12 months. Statutory earnings per share are forecast to descend 13% to CA$1.59 in the same period. Before this earnings report, the analysts had been forecasting revenues of CA$425.6m and earnings per share (EPS) of CA$1.45 in 2022. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

It will come as no surprise to learn that the analysts have increased their price target for Hammond Power Solutions 18% to CA$19.25on the back of these upgrades.

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 clear from the latest estimates that Hammond Power Solutions' rate of growth is expected to accelerate meaningfully, with the forecast 10% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 6.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 31% annually. So it's clear that despite the acceleration in growth, Hammond Power Solutions is expected to grow meaningfully slower than the industry average.

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 Hammond Power Solutions following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Hammond Power Solutions that you need to be mindful of.

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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.