Earnings Release: Here's Why Analysts Cut Their ProFrac Holding Corp. (NASDAQ:ACDC) Price Target To US$9.25

There's been a major selloff in ProFrac Holding Corp. (NASDAQ:ACDC) shares in the week since it released its second-quarter report, with the stock down 22% to US$5.77. Revenues were US$579m, with ProFrac Holding reporting some 9.3% below analyst expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on ProFrac Holding after the latest results.

See our latest analysis for ProFrac Holding

Taking into account the latest results, the consensus forecast from ProFrac Holding's six analysts is for revenues of US$2.41b in 2024. This reflects a solid 8.4% improvement in revenue compared to the last 12 months. ProFrac Holding is also expected to turn profitable, with statutory earnings of US$0.70 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.50b and earnings per share (EPS) of US$0.70 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The average price target was reduced 5.1% to US$9.25, with the lower revenue forecasts indicating negative sentiment towards ProFrac Holding, even though earnings forecasts were unchanged. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on ProFrac Holding, with the most bullish analyst valuing it at US$11.00 and the most bearish at US$7.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. We would highlight that ProFrac Holding's revenue growth is expected to slow, with the forecast 18% annualised growth rate until the end of 2024 being well below the historical 38% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.2% annually. Even after the forecast slowdown in growth, it seems obvious that ProFrac Holding is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. With that said, earnings are more important to the long-term value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of ProFrac Holding's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for ProFrac Holding going out to 2026, 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 1 warning sign for ProFrac Holding 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.