Earnings Release: Here's Why Analysts Cut Their Herfy Food Services Company (TADAWUL:6002) Price Target To ر.س30.24

Last week, you might have seen that Herfy Food Services Company (TADAWUL:6002) released its second-quarter result to the market. The early response was not positive, with shares down 9.4% to ر.س24.10 in the past week. Revenues came in 3.0% below expectations, at ر.س301m. Statutory earnings per share were relatively better off, with a per-share profit of ر.س0.13 being roughly in line with analyst estimates. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Herfy Food Services

Following last week's earnings report, Herfy Food Services' four analysts are forecasting 2024 revenues to be ر.س1.22b, approximately in line with the last 12 months. Earnings are expected to improve, with Herfy Food Services forecast to report a statutory profit of ر.س0.46 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of ر.س1.25b and earnings per share (EPS) of ر.س0.71 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.

The average price target fell 5.5% to ر.س30.24, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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 Herfy Food Services, with the most bullish analyst valuing it at ر.س39.52 and the most bearish at ر.س25.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Herfy Food Services is forecast to grow faster in the future than it has in the past, with revenues expected to display 4.0% annualised growth until the end of 2024. If achieved, this would be a much better result than the 0.5% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 13% annually for the foreseeable future. So although Herfy Food Services' revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Herfy Food Services. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Herfy Food Services' revenue is expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Herfy Food Services' future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Herfy Food Services. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Herfy Food Services going out to 2026, and you can see them free on our platform here..

Even so, be aware that Herfy Food Services is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com