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CyrusOne Inc. (NASDAQ:CONE) 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. Statutory earnings per share fell badly short of expectations, coming in at US$0.36, some 58% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$981m. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
After the latest results, the nine analysts covering CyrusOne are now predicting revenues of US$1.05b in 2020. If met, this would reflect a satisfactory 7.1% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 50% to US$0.18 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.08b and earnings per share (EPS) of US$0.12 in 2020. While revenue forecasts have been revised downwards, analysts look to have become more optimistic on the company's earnings power, given the massive increase in to earnings per share forecasts.
There's been no real change to the average price target of US$72.39, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. There are some variant perceptions on CyrusOne, with the most bullish analyst valuing it at US$85.00 and the most bearish at US$57.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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 CyrusOne's revenue growth is expected to slow, with forecast 7.1% increase next year well below the historical 22%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.9% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkCyrusOne will grow faster than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards CyrusOne following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. Still, earnings are more important to the long-term value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on CyrusOne. 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 CyrusOne going out to 2024, and you can see them free on our platform here..
It might also be worth considering whether CyrusOne's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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