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Results: Heritage-Crystal Clean, Inc Confounded Analyst Expectations With A Surprise Profit

Simply Wall St
·4 mins read

Investors in Heritage-Crystal Clean, Inc (NASDAQ:HCCI) had a good week, as its shares rose 5.7% to close at US$15.32 following the release of its quarterly results. Although revenues of US$87m were in line with analyst expectations, Heritage-Crystal Clean surprised on the earnings front, with an unexpected (statutory) profit of US$0.17 per share a nice improvement on the losses that the analystsforecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Heritage-Crystal Clean

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Following the latest results, Heritage-Crystal Clean's five analysts are now forecasting revenues of US$437.4m in 2021. This would be a modest 6.0% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to leap 248% to US$0.67. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$437.1m and earnings per share (EPS) of US$0.63 in 2021. So the consensus seems to have become somewhat more optimistic on Heritage-Crystal Clean's earnings potential following these results.

The average the analysts price target fell 6.4% to US$20.40, suggesting thatthe analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Heritage-Crystal Clean analyst has a price target of US$23.00 per share, while the most pessimistic values it at US$17.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Heritage-Crystal Clean's past performance and to peers in the same industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 6.0%, in line with its 5.8% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 6.0% per year. So although Heritage-Crystal Clean is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Heritage-Crystal Clean following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall 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.

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 estimates - from multiple Heritage-Crystal Clean analysts - going out to 2024, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with Heritage-Crystal Clean .

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@simplywallst.com.