Advanced Emissions Solutions, Inc. (NASDAQ:ADES) just released its latest quarterly report and things are not looking great. Unfortunately, Advanced Emissions Solutions delivered a serious earnings miss. Revenues of US$19m were 14% below expectations, and earnings per share of US$0.21 missed estimates by 74%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from Advanced Emissions Solutions's sole analyst is for revenues of US$98.4m in 2020, which would reflect a major 52% improvement in sales compared to the last 12 months. Earnings per share are expected to shoot up 166% to US$4.81. In the lead-up to this report, analysts had been modelling revenues of US$110.7m and earnings per share (EPS) of US$4.99 in 2020. It looks like analyst sentiment has fallen somewhat in the aftermath of these results, with a real cut to revenue estimates and a small dip in consensus earnings per share numbers as well.
It'll come as no surprise then, to learn that analysts have cut their price target 49% to US$18.00.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Advanced Emissions Solutions's past performance and to peers in the same market. Analysts are definitely expecting Advanced Emissions Solutions's growth to accelerate, with the forecast 52% growth ranking favourably alongside historical growth of 20% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.7% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Advanced Emissions Solutions to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Advanced Emissions Solutions's revenues are expected to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Advanced Emissions Solutions's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Advanced Emissions Solutions. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Advanced Emissions Solutions going out as far as 2021, and you can see them free on our platform here.
You can also view our analysis of Advanced Emissions Solutions's balance sheet, and whether we think Advanced Emissions Solutions is carrying too much debt, for free on our platform here.
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