A week ago, Physicians Realty Trust (NYSE:DOC) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$108m, some 2.5% above estimates, and earnings per share (EPS) coming in at US$0.08, 24% ahead of expectations. 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. We thought readers would find it interesting to see analysts’ latest post-earnings forecasts for next year.
After the latest results, the nine analysts covering Physicians Realty Trust are now predicting revenues of US$452m in 2020. If met, this would reflect a notable 9.3% improvement in sales compared to the last 12 months. Earnings per share are expected to climb 17% to US$0.27. In the lead-up to this report, analysts had been modelling revenues of US$448m and earnings per share (EPS) of US$0.26 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$18.69, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Physicians Realty Trust, with the most bullish analyst valuing it at US$20.00 and the most bearish at US$17.50 per share. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the Physicians Realty Trust’s past performance and to peers in the same market. It’s pretty clear that analysts expect Physicians Realty Trust’s revenue growth will slow down substantially, with revenues next year expected to grow 9.3%, compared to a historical growth rate of 35% over the past five years. By way of comparison, the 185 other companies in this market with analyst coverage, are forecast to grow their revenue at 5.1% next year. So it’s pretty clear that, while Physicians Realty Trust’s revenue growth is expected to slow, it’s still expected to grow faster than 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 Physicians Realty Trust’s earnings potential next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – and our data does suggest that Physicians Realty Trust’s revenues are expected to 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.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Physicians Realty Trust analysts – going out to 2023, and you can see them free on our platform here.
It might also be worth considering whether Physicians Realty Trust’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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