Earnings Update: Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) Just Reported And Analysts Are Trimming Their Forecasts

Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) missed earnings with its latest second-quarter results, disappointing overly-optimistic forecasters. Revenues missed expectations somewhat, coming in at US$63m, but statutory earnings fell catastrophically short, with a loss of US$0.28 some 69% larger than what the analysts had predicted. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Hydrofarm Holdings Group

Following the recent earnings report, the consensus from four analysts covering Hydrofarm Holdings Group is for revenues of US$247.3m in 2023. This implies a perceptible 5.2% decline in revenue compared to the last 12 months. Losses are predicted to fall substantially, shrinking 55% to US$0.88. Before this latest report, the consensus had been expecting revenues of US$280.3m and US$0.74 per share in losses. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The consensus price target fell 21% to US$1.18, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Hydrofarm Holdings Group analyst has a price target of US$2.00 per share, while the most pessimistic values it at US$1.10. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Over the past three years, revenues have declined around 0.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 10% decline in revenue until the end of 2023. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.2% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Hydrofarm Holdings Group to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Hydrofarm Holdings Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Hydrofarm Holdings Group analysts - going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Hydrofarm Holdings Group (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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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.