Target Hospitality Corp. (NASDAQ:TH) just released its latest third-quarter report and things are not looking great. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$82m, earnings missed forecasts by an incredible 34%, coming in at just US$0.10 per share. 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 analysts are forecasting for next year.
Following last week's earnings report, Target Hospitality's five analysts are forecasting 2020 revenues to be US$339.6m, approximately in line with the last 12 months. Earnings per share are expected to shoot up 459% to US$0.57. Yet prior to the latest earnings, analysts had been forecasting revenues of US$372.9m and earnings per share (EPS) of US$0.76 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share forecasts.
It'll come as no surprise then, to learn that analysts have cut their price target 18% to US$9.70. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Target Hospitality at US$11.00 per share, while the most bearish prices it at US$7.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Target Hospitality's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.5% a significant reduction from annual growth of 38% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 7.0% annually for the foreseeable future. It's pretty clear that Target Hospitality's revenues are expected to perform substantially worse 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Target Hospitality. Long-term earnings power is much more important than next year's profits. We have forecasts for Target Hospitality going out to 2021, and you can see them free on our platform here.
You can also view our analysis of Target Hospitality's balance sheet, and whether we think Target Hospitality is carrying too much debt, for free on our platform here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.