Results: The Honest Company, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

One of the biggest stories of last week was how The Honest Company, Inc. (NASDAQ:HNST) shares plunged 22% in the week since its latest third-quarter results, closing yesterday at US$2.67. Revenues of US$93m reported a marginal miss, falling short of forecasts by 6.9%, but earnings were better than expected - statutory profits came in at US$0.01 per share, a nice change from the loss the analysts expected. Following the result, the 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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After the latest results, the consensus from Honest Company's seven analysts is for revenues of US$369.5m in 2026, which would reflect a noticeable 3.5% decline in revenue compared to the last year of performance. Per-share earnings are expected to soar 52% to US$0.096. Before this earnings report, the analysts had been forecasting revenues of US$414.7m and earnings per share (EPS) of US$0.10 in 2026. Indeed, we can see that sentiment has declined measurably after results came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.

View our latest analysis for Honest Company

The consensus price target fell 31% to US$4.71, with the weaker earnings outlook clearly leading valuation estimates. 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 Honest Company analyst has a price target of US$7.00 per share, while the most pessimistic values it at US$3.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 2.8% by the end of 2026. This indicates a significant reduction from annual growth of 5.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.4% per year. It's pretty clear that Honest Company's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Honest Company. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Honest Company going out to 2027, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Honest Company (1 makes us a bit uncomfortable) you should be aware 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.