Yahoo Finance Retail Properties of America, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
It's been a sad week for Retail Properties of America, Inc. (NYSE:RPAI), who've watched their investment drop 13% to US$5.14 in the week since the company reported its first-quarter result. It looks like a credible result overall - although revenues of US$119m were what the analysts expected, Retail Properties of America surprised by delivering a (statutory) profit of US$0.10 per share, an impressive 83% above what was 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for Retail Properties of America
Following last week's earnings report, Retail Properties of America's four analysts are forecasting 2020 revenues to be US$469.0m, approximately in line with the last 12 months. Per-share earnings are expected to rise 3.6% to US$0.15. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$468.0m and earnings per share (EPS) of US$0.27 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
It might be a surprise to learn that the consensus price target fell 25% to US$7.50, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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 Retail Properties of America, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$5.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Retail Properties of America's past performance and to peers in the same industry. We would also point out that the forecast 1.8% revenue decline is better than the historical trend, which saw revenues shrink -5.9% annually over the past five years
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Retail Properties of America. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Retail Properties of America's revenues are expected to perform worse 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Retail Properties of America. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Retail Properties of America going out to 2021, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Retail Properties of America (1 is a bit concerning) you should be aware of.
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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