STAG Industrial, Inc. (NYSE:STAG) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 3.1% to hit US$119m. STAG Industrial also reported a statutory profit of US$0.42, which was an impressive 307% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from STAG Industrial's six analysts is for revenues of US$465.4m in 2020, which would reflect a meaningful 8.5% increase on its sales over the past 12 months. Statutory earnings per share are forecast to dive 49% to US$0.38 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$465.3m and earnings per share (EPS) of US$0.38 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target fell 5.2% to US$30.33, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the quarterly results. 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. There are some variant perceptions on STAG Industrial, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$24.00 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that STAG Industrial's revenue growth is expected to slow, with forecast 8.5% increase next year well below the historical 16%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.5% next year. Even after the forecast slowdown in growth, it seems obvious that STAG Industrial is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for STAG Industrial going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 5 warning signs for STAG Industrial (1 is concerning!) that you should be aware of.
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