It's been a good week for Herc Holdings Inc. (NYSE:HRI) shareholders, because the company has just released its latest quarterly results, and the shares gained 5.8% to US$36.17. Although revenues of US$368m were in line with analyst expectations, Herc Holdings surprised on the earnings front, with an unexpected (statutory) profit of US$0.07 per share a nice improvement on the losses that the analystsforecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from seven analysts covering Herc Holdings is for revenues of US$1.70b in 2020, implying an uncomfortable 8.2% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 13% to US$1.29 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.68b and earnings per share (EPS) of US$0.74 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the very substantial lift in earnings per share expectations following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 18% to US$44.75. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Herc Holdings at US$51.00 per share, while the most bearish prices it at US$40.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Herc Holdings is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Herc Holdings' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 8.2% revenue decline a notable change from historical growth of 5.7% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.9% annually for the foreseeable future. It's pretty clear that Herc Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Herc Holdings' earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Herc Holdings' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Herc Holdings going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 5 warning signs for Herc Holdings (of which 1 shouldn't be ignored!) you should know about.
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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