Things Look Grim For Target Hospitality Corp. (NASDAQ:TH) After Today's Downgrade

The latest analyst coverage could presage a bad day for Target Hospitality Corp. (NASDAQ:TH), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the consensus from two analysts covering Target Hospitality is for revenues of US$408m in 2024, implying a disturbing 31% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to nosedive 57% to US$0.71 in the same period. Prior to this update, the analysts had been forecasting revenues of US$456m and earnings per share (EPS) of US$0.91 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Target Hospitality

It'll come as no surprise then, to learn that the analysts have cut their price target 22% to US$15.67.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Target Hospitality's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 26% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 18% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 10% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Target Hospitality is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Target Hospitality.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Target Hospitality, including concerns around earnings quality. For more information, you can click here to discover this and the 1 other concern we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.