The analysts might have been a bit too bullish on Medical Properties Trust, Inc. (NYSE:MPW), given that the company fell short of expectations when it released its quarterly results last week. Results showed a clear earnings miss, with US$294m revenue coming in 4.8% lower than what the analystsexpected. Statutory earnings per share (EPS) of US$0.15 missed the mark badly, arriving some 46% below what was expected. Following the result, the 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 the analysts are expecting for next year.
Following the latest results, Medical Properties Trust's six analysts are now forecasting revenues of US$1.25b in 2020. This would be a sizeable 27% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 27% to US$1.04. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.28b and earnings per share (EPS) of US$1.10 in 2020. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
The analysts made no major changes to their price target of US$20.23, suggesting the downgrades are not expected to have a long-term impact on Medical Properties Trust'svaluation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Medical Properties Trust, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$16.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Medical Properties Trust's rate of growth is expected to accelerate meaningfully, with the forecast 27% revenue growth noticeably faster than its historical growth of 18%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.5% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Medical Properties Trust is expected to grow much faster than its 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. They also downgraded their revenue estimates, although industry data suggests that Medical Properties Trust's revenues are expected to grow faster 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Medical Properties Trust. Long-term earnings power is much more important than next year's profits. We have forecasts for Medical Properties Trust going out to 2024, 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 4 warning signs for Medical Properties Trust (1 is potentially serious!) that you need to be mindful of.
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