Need To Know: Analysts Just Made A Substantial Cut To Their MGM Growth Properties LLC (NYSE:MGP) Estimates
Market forces rained on the parade of MGM Growth Properties LLC (NYSE:MGP) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from ten analysts covering MGM Growth Properties is for revenues of US$799m in 2020, implying a definite 11% decline in sales compared to the last 12 months. Per-share earnings are expected to soar 188% to US$0.58. Prior to this update, the analysts had been forecasting revenues of US$918m and earnings per share (EPS) of US$1.07 in 2020. Indeed, we can see that the analysts are a lot more bearish about MGM Growth Properties' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for MGM Growth Properties
Despite the cuts to forecast earnings, there was no real change to the US$29.85 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 MGM Growth Properties analyst has a price target of US$35.00 per share, while the most pessimistic values it at US$24.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await MGM Growth Properties shareholders.
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. We would highlight that sales are expected to reverse, with the forecast 11% revenue decline a notable change from historical growth of 11% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.9% annually for the foreseeable future. It's pretty clear that MGM Growth Properties' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for MGM Growth Properties. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of MGM Growth Properties.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with MGM Growth Properties' financials, such as dilutive stock issuance over the past year. Learn more, and discover the 3 other risks we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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