Sotera Health Company (NASDAQ:SHC) reported earnings for the full year 2023, which missed analyst expectations by 17%. Despite the miss, the company’s revenue was in line with analyst estimates. Analysts have since revised their earnings models, and the most recent consensus from six analysts is for revenues of US$1.10 billion in 2024, which would represent a 4.6% increase on the previous year’s revenue.
Per-share earnings are expected to grow by 89% to US$0.34. In the lead-up to this report, analysts had been modeling revenues of US$1.10 billion and earnings per share (EPS) of US$0.52 in 2024. Despite cutting their earnings forecasts, analysts have lifted their price target by 5.9% to US$17.83, suggesting that these impacts are not expected to weigh on the stock’s value in the long term3.The analysts have become more bearish following the latest results, with a large cut to EPS estimates. However, the price target has also increased, indicating that the analysts still see value in the stock. The spread in estimates is relatively narrow, which could suggest that the business’ future is relatively easy to value, or that the analysts have a strong view on its prospects3.Looking at the bigger picture, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Sotera Health’s revenue growth is expected to slow, with the forecast 4.6% annualized growth rate until the end of 2024 being well below the historical 7.4% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that Sotera Health is also expected to grow slower than other industry participants1.The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it’s tracking in line with expectations. Although our data does suggest that Sotera Health’s revenue is 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.With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Sotera Health going out to 2026, and you can see them free on our platform here3.And what about risks? Every company has them, and we’ve spotted 2 warning signs for Sotera Health (of which 1 is a bit unpleasant!) that you should know about
