High Liner Foods Incorporated (TSE:HLF) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.1% to hit US$269m. High Liner Foods also reported a statutory profit of US$0.41, which was an impressive 21% above what the analysts had forecast. The 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus, from the four analysts covering High Liner Foods, is for revenues of US$836.2m in 2020, which would reflect a definite 10% reduction in High Liner Foods' sales over the past 12 months. Per-share earnings are expected to soar 21% to US$0.35. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$914.1m and earnings per share (EPS) of US$0.83 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
It'll come as no surprise then, to learn that the analysts have cut their price target 18% to US$6.61. 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 High Liner Foods analyst has a price target of US$8.57 per share, while the most pessimistic values it at US$5.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the High Liner Foods' past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that High Liner Foods'decline is expected to accelerate, with revenues forecast to fall 10% next year, topping off a historical decline of 0.6% 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 3.8% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect High Liner Foods to suffer 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 High Liner Foods. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on High Liner Foods. Long-term earnings power is much more important than next year's profits. We have forecasts for High Liner Foods going out to 2021, and you can see them free on our platform here.
You still need to take note of risks, for example - High Liner Foods has 5 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
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