Last week saw the newest full-year earnings release from First Real Estate Investment Trust (SGX:AW9U), an important milestone in the company's journey to build a stronger business. Statutory earnings per share fell badly short of expectations, coming in at S$0.057, some 28% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at S$115m. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following last week's earnings report, First Real Estate Investment Trust's only analyst are forecasting 2020 revenues to be S$116.1m, approximately in line with the last 12 months. Statutory earnings per share are expected to jump 39% to S$0.08. Yet prior to the latest earnings, analysts had been forecasting revenues of S$118.4m and earnings per share (EPS) of S$0.085 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at S$1.15, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future.
In addition, we can look to First Real Estate Investment Trust's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect First Real Estate Investment Trust's revenue growth will slow down substantially, with revenues next year expected to grow 0.7%, compared to a historical growth rate of 4.3% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.9% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than First Real Estate Investment Trust.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for First Real Estate Investment Trust. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. 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 First Real Estate Investment Trust. Long-term earnings power is much more important than next year's profits. We have analyst estimates for First Real Estate Investment Trust going out as far as 2022, and you can see them free on our platform here.
You can also view our analysis of First Real Estate Investment Trust's balance sheet, and whether we think First Real Estate Investment Trust is carrying too much debt, for free on our platform here.
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