Heritage-Crystal Clean, Inc Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models

Heritage-Crystal Clean, Inc (NASDAQ:HCCI) last week reported its latest annual results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Statutory earnings per share fell badly short of expectations, coming in at US$0.36, some 53% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$444m. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Heritage-Crystal Clean

Following the latest results, Heritage-Crystal Clean's five analysts are now forecasting revenues of US$471.8m in 2020. This would be a modest 6.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to soar 260% to US$1.30. Yet prior to the latest earnings, analysts had been forecasting revenues of US$471.8m and earnings per share (EPS) of US$1.34 in 2020. 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 analysts did make a small dip in their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$30.75, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Heritage-Crystal Clean analyst has a price target of US$34.00 per share, while the most pessimistic values it at US$27.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's clear from the latest estimates that Heritage-Crystal Clean's rate of growth is expected to accelerate meaningfully, with forecast 6.2% revenue growth noticeably faster than its historical growth of 5.0%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 5.2% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Heritage-Crystal Clean is expected to grow at about the same rate as the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Heritage-Crystal Clean. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Heritage-Crystal Clean going out to 2024, and you can see them free on our platform here..

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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