Revenue Beat: New Residential Investment Corp. Exceeded Revenue Forecasts By 11% And Analysts Are Updating Their Estimates
New Residential Investment Corp. (NYSE:NRZ) just released its latest annual results and things are looking bullish. New Residential Investment beat revenue and statutory earnings per share (EPS) expectations, with sales hitting US$1.6b (11% ahead of estimates) and EPS reaching US$1.34 (a 5.2% beat). 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
See our latest analysis for New Residential Investment
Following the latest results, New Residential Investment's nine analysts are now forecasting revenues of US$2.03b in 2020. This would be a major 26% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shoot up 46% to US$1.97. In the lead-up to this report, analysts had been modelling revenues of US$2.03b and earnings per share (EPS) of US$1.92 in 2020. So the consensus seems to have become somewhat more optimistic on New Residential Investment's earnings potential following these results.
The consensus price target was unchanged at US$18.08, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values New Residential Investment at US$19.50 per share, while the most bearish prices it at US$16.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to New Residential Investment's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We can infer from the latest estimates that analysts are expecting a continuation of New Residential Investment's historical trends, as next year's forecast 26% revenue growth is roughly in line with 26% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the are forecast to see their revenues grow 22% per year. It's clear that while New Residential Investment's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the market itself.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around New Residential Investment's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at US$18.08, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on New Residential Investment. Long-term earnings power is much more important than next year's profits. We have forecasts for New Residential Investment going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether New Residential Investment's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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