Alexandria Real Estate Equities, Inc. Just Beat EPS By 60%: Here's What Analysts Think Will Happen Next
It's been a good week for Alexandria Real Estate Equities, Inc. (NYSE:ARE) shareholders, because the company has just released its latest annual results, and the shares gained 2.1% to US$168. It looks like a credible result overall - although revenues of US$1.5b were what analysts expected, Alexandria Real Estate Equities surprised by delivering a (statutory) profit of US$3.12 per share, an impressive 60% above what analysts had forecast. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Check out our latest analysis for Alexandria Real Estate Equities
Taking into account the latest results, the latest consensus from Alexandria Real Estate Equities's four analysts is for revenues of US$1.72b in 2020, which would reflect a notable 12% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 19% to US$2.52 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$1.72b and earnings per share (EPS) of US$2.85 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the real cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$170, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values Alexandria Real Estate Equities at US$190 per share, while the most bearish prices it at US$136. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Alexandria Real Estate Equities's revenue growth is expected to slow, with forecast 12% increase next year well below the historical 15%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.1% next year. So it's pretty clear that, while Alexandria Real Estate Equities's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
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. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at US$170, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Alexandria Real Estate Equities. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Alexandria Real Estate Equities going out to 2021, and you can see them free on our platform here..
It might also be worth considering whether Alexandria Real Estate Equities's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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