CareTrust REIT, Inc. (NASDAQ:CTRE) came out with its yearly results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Results were roughly in line with estimates, with revenues of US$163m and statutory earnings per share of US$0.49. 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. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for CareTrust REIT from seven analysts is for revenues of US$178.2m in 2020, which is a notable 9.0% increase on its sales over the past 12 months. Statutory earnings per share are expected to jump 61% to US$0.80. Yet prior to the latest earnings, analysts had been forecasting revenues of US$177.8m and earnings per share (EPS) of US$0.82 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$22.50, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values CareTrust REIT at US$25.00 per share, while the most bearish prices it at US$18.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the CareTrust REIT's past performance and to peers in the same market. It's pretty clear that analysts expect CareTrust REIT's revenue growth will slow down substantially, with revenues next year expected to grow 9.0%, compared to a historical growth rate of 21% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.9% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkCareTrust REIT will grow faster 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. 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$22.50, 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 CareTrust REIT. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple CareTrust REIT analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of CareTrust REIT's balance sheet, and whether we think CareTrust REIT is carrying too much debt, for free on our platform here.
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