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Earnings Beat: City Office REIT, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St
·4 min read

As you might know, City Office REIT, Inc. (NYSE:CIO) recently reported its quarterly numbers. It was overall a positive result, with revenues beating expectations by 3.7% to hit US$41m. City Office REIT also reported a statutory profit of US$0.02, which was a nice improvement from the loss that the analysts were predicting. This is an important time for investors, as they can track a company's performance in its report, look at what experts 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 estimates suggest is in store for next year.

Check out our latest analysis for City Office REIT

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from City Office REIT's six analysts is for revenues of US$164.3m in 2021, which would reflect a reasonable 2.7% improvement in sales compared to the last 12 months. Losses are forecast to balloon 1,604% to US$0.14 per share. Before this earnings announcement, the analysts had been modelling revenues of US$166.3m and losses of US$0.14 per share in 2021.

As a result there was no major change to the consensus price target of US$10.50, implying that the business is trading roughly in line with expectations despite ongoing losses. 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. The most optimistic City Office REIT analyst has a price target of US$13.00 per share, while the most pessimistic values it at US$8.00. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that City Office REIT's revenue growth will slow down substantially, with revenues next year expected to grow 2.7%, compared to a historical growth rate of 23% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.0% next year. Factoring in the forecast slowdown in growth, it seems obvious that City Office REIT is also expected to grow slower than other industry participants.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for City Office REIT going out to 2022, and you can see them free on our platform here..

Plus, you should also learn about the 4 warning signs we've spotted with City Office REIT (including 2 which are a bit concerning) .

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.