Herfy Food Services Company Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

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 2.9% to ر.س43.10 in the past week. Revenues were ر.س292m, 13% below analyst expectations, although losses didn't appear to worsen significantly, with a statutory per-share loss of ر.س2.49 being in line with what the analysts anticipated. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Herfy Food Services

After the latest results, the five analysts covering Herfy Food Services are now predicting revenues of ر.س1.38b in 2022. If met, this would reflect a modest 6.2% improvement in sales compared to the last 12 months. Per-share earnings are expected to increase 3.3% to ر.س2.51. Yet prior to the latest earnings, the analysts had been anticipated revenues of ر.س1.38b and earnings per share (EPS) of ر.س2.23 in 2022. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.

The average the analysts price target fell 12% to ر.س49.64, suggesting thatthe analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Herfy Food Services, with the most bullish analyst valuing it at ر.س51.70 and the most bearish at ر.س48.00 per share. This is a very narrow spread of estimates, implying either that Herfy Food Services is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Herfy Food Services' rate of growth is expected to accelerate meaningfully, with the forecast 13% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 1.6% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 19% per year. So it's clear that despite the acceleration in growth, Herfy Food Services is expected to grow meaningfully slower than the industry average.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Herfy Food Services' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will 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.

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 Herfy Food Services going out to 2024, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 2 warning signs for Herfy Food Services that you need to be mindful of.

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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.