It's been a mediocre week for Kerry Properties Limited (HKG:683) shareholders, with the stock dropping 15% to HK$18.56 in the week since its latest full-year results. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at HK$18b, statutory earnings beat expectations by a notable 27%, coming in at HK$4.74 per share. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Kerry Properties after the latest results.
Following the recent earnings report, the consensus fromten analysts covering Kerry Properties is for revenues of HK$15.1b in 2020, implying a definite 16% decline in sales compared to the last 12 months. Statutory earnings per share are expected to dive 33% to HK$3.17 in the same period. Before this earnings report, the analysts had been forecasting revenues of HK$16.2b and earnings per share (EPS) of HK$3.37 in 2020. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
The consensus price target fell 5.7% to HK$25.21, with the weaker earnings outlook clearly leading valuation estimates. 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. Currently, the most bullish analyst values Kerry Properties at HK$30.00 per share, while the most bearish prices it at HK$19.40. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kerry Properties is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Kerry Properties's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Kerry Properties analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Kerry Properties (1 is concerning!) that you need to be mindful of.
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