CoreSite Realty Corporation (NYSE:COR) shares fell 4.1% to US$113 in the week since its latest full-year results. It looks like the results were a bit of a negative overall. While revenues of US$573m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 2.0% to hit US$2.05 per share. 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. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on CoreSite Realty after the latest results.
Following the latest results, CoreSite Realty’s 15 analysts are now forecasting revenues of US$610.4m in 2020. This would be a credible 6.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to drop 15% to US$1.76 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$623.7m and earnings per share (EPS) of US$2.15 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share forecasts.
Analysts made no major changes to their price target of US$116, suggesting the downgrades are not expected to have a long-term impact on CoreSite Realty’s valuation. 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. Currently, the most bullish analyst values CoreSite Realty at US$141 per share, while the most bearish prices it at US$100.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await CoreSite Realty shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the CoreSite Realty’s past performance and to peers in the same market. We would highlight that CoreSite Realty’s revenue growth is expected to slow, with forecast 6.6% increase next year well below the historical 15%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.1% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkCoreSite Realty will grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CoreSite Realty. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple CoreSite Realty analysts – going out to 2024, and you can see them free on our platform here.
You can also view our analysis of CoreSite Realty’s balance sheet, and whether we think CoreSite Realty is carrying too much debt, for free on our platform here.
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