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Sunstone Hotel Investors, Inc. (NYSE:SHO) Consensus Forecasts Have Become A Little Darker Since Its Latest Report

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Sunstone Hotel Investors, Inc. (NYSE:SHO) shareholders are probably feeling a little disappointed, since its shares fell 8.4% to US$7.85 in the week after its latest first-quarter results. It was a pretty bad result overall; while revenues were in line with expectations at US$191m, statutory losses exploded to US$0.75 per share. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Sunstone Hotel Investors

NYSE:SHO Past and Future Earnings May 12th 2020
NYSE:SHO Past and Future Earnings May 12th 2020

After the latest results, the consensus from Sunstone Hotel Investors' nine analysts is for revenues of US$503.9m in 2020, which would reflect a disturbing 52% decline in sales compared to the last year of performance. Losses are forecast to balloon 419% to US$1.31 per share. Before this earnings announcement, the analysts had been modelling revenues of US$616.2m and losses of US$0.40 per share in 2020. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The consensus price target fell 5.1% to US$9.25, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on Sunstone Hotel Investors, with the most bullish analyst valuing it at US$12.00 and the most bearish at US$7.00 per share. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 2.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 52% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 4.9% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Sunstone Hotel Investors to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Sunstone Hotel Investors. Long-term earnings power is much more important than next year's profits. We have forecasts for Sunstone Hotel Investors going out to 2023, and you can see them free on our platform here.

Even so, be aware that Sunstone Hotel Investors is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.