R1 RCM Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

It's been a good week for R1 RCM Inc. (NASDAQ:RCM) shareholders, because the company has just released its latest first-quarter results, and the shares gained 4.3% to US$16.26. Although revenues of US$546m were in line with analyst expectations, R1 RCM surprised on the earnings front, with an unexpected (statutory) profit of US$0.0007 per share a nice improvement on the losses that the analystsforecast. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for R1 RCM

Taking into account the latest results, the current consensus from R1 RCM's 15 analysts is for revenues of US$2.31b in 2023, which would reflect a decent 18% increase on its sales over the past 12 months. Earnings are expected to improve, with R1 RCM forecast to report a statutory profit of US$0.062 per share. Before this earnings report, the analysts had been forecasting revenues of US$2.31b and earnings per share (EPS) of US$0.09 in 2023. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.

The consensus price target held steady at US$19.13, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on R1 RCM, with the most bullish analyst valuing it at US$26.00 and the most bearish at US$16.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the R1 RCM's past performance and to peers in the same industry. It's clear from the latest estimates that R1 RCM's rate of growth is expected to accelerate meaningfully, with the forecast 24% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 18% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.5% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that R1 RCM is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$19.13, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for R1 RCM going out to 2025, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for R1 RCM that you need to take into consideration.

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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.