- Oops!Something went wrong.Please try again later.
Investors in Houghton Mifflin Harcourt Company (NASDAQ:HMHC) had a good week, as its shares rose 7.9% to close at US$9.80 following the release of its first-quarter results. Revenues of US$146m came in a modest 5.0% below forecasts. Statutory losses were a relative bright spot though, with a per-share loss of US$0.41 coming in a substantial 27% smaller than what the analysts had 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.
Following the recent earnings report, the consensus from dual analysts covering Houghton Mifflin Harcourt is for revenues of US$850.5m in 2021, implying an uneasy 17% decline in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 70% to US$0.45. Before this earnings announcement, the analysts had been modelling revenues of US$1.04b and losses of US$0.45 per share in 2021. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.
The analysts lifted their price target 19% to US$6.25per share, with reduced revenue estimates seemingly not expected to have a long-term impact on the intrinsic value of the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Houghton Mifflin Harcourt's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 22% to the end of 2021. This tops off a historical decline of 4.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 18% per year. So while a broad number of companies are forecast to grow, unfortunately Houghton Mifflin Harcourt is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Houghton Mifflin Harcourt going out as far as 2023, and you can see them free on our platform here.
Plus, you should also learn about the 3 warning signs we've spotted with Houghton Mifflin Harcourt .
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.