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HollyFrontier Corporation (NYSE:HFC) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.
Following the upgrade, the latest consensus from HollyFrontier's ten analysts is for revenues of US$14b in 2021, which would reflect a huge 27% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$1.35 per share this year. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$13b and losses of US$0.70 per share in 2021. It looks like there's been a definite improvement in business conditions, with a revenue upgrade supposed to lead to profitability sooner than previously forecast.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$39.36, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values HollyFrontier at US$52.00 per share, while the most bearish prices it at US$31.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await HollyFrontier shareholders.
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. It's clear from the latest estimates that HollyFrontier's rate of growth is expected to accelerate meaningfully, with the forecast 38% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 4.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.5% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that HollyFrontier is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that there is now an expectation for HollyFrontier to become profitable this year, compared to previous expectations of a loss. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So HollyFrontier could be a good candidate for more research.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for HollyFrontier going out to 2023, and you can see them free on our platform here..
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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. 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.
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