Harte Hanks, Inc. (NYSE:HHS) shareholders are probably feeling a little disappointed, since its shares fell 5.2% to US$2.37 in the week after its latest first-quarter results. Harte Hanks beat expectations by 2.6% with revenues of US$41m. It also surprised on the earnings front, with an unexpected statutory profit of US$0.67 per share a nice improvement on the losses that the analyst forecast. The analyst 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. With this in mind, we've gathered the latest statutory forecasts to see what the analyst is expecting for next year.
Following the recent earnings report, the consensus from sole analyst covering Harte Hanks is for revenues of US$161.7m in 2020, implying a chunky 19% decline in sales compared to the last 12 months. Earnings are expected to improve, with Harte Hanks forecast to report a statutory profit of US$0.24 per share. Before this earnings announcement, the analyst had been modelling revenues of US$163.4m and losses of US$0.99 per share in 2020. Although we saw no serious change to the revenue outlook, the analyst has definitely increased their earnings estimates, estimating a profit next year, compared to previous forecasts of a loss. So it seems like the consensus has become substantially more bullish on Harte Hanks.
The consensus price target fell 27% to US$11.00, suggesting the increase in earnings forecasts was not enough to offset other the analyst concerns.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing that stands out from these estimates is that revenues are expected to keep falling, roughly in line with the historical decline of 16% per annum over the past five years. Compare this with our data on other companies (with analyst coverage) in the industry, which in aggregate are forecast to see their revenue grow 4.2% next year. So it looks like Harte Hanks' revenues are expected to decline at a slower rate than the wider industry.
The Bottom Line
The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analyst now expecting Harte Hanks to become profitable next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. Furthermore, the analyst 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 Harte Hanks. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with Harte Hanks .
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