Shareholders might have noticed that Summit Industrial Income REIT (TSE:SMU.UN) filed its first-quarter result this time last week. The early response was not positive, with shares down 6.1% to CA$9.44 in the past week. It was an okay result overall, with revenues coming in at CA$47m, roughly what the analysts had been expecting. Following the result, the 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the three analysts covering Summit Industrial Income REIT, is for revenues of CA$138.5m in 2020, which would reflect a not inconsiderable 13% reduction in Summit Industrial Income REIT's sales over the past 12 months. Prior to the latest earnings, the analysts were forecasting revenues of CA$189.7m in 2020, and did not provide an earnings per share estimate. The consensus view seems to have become more pessimistic on Summit Industrial Income REIT, noting the large cut to revenue estimates following last week's results.
Intriguingly,the analysts have cut their price target 5.9% to CA$11.94 showing a clear decline in sentiment around Summit Industrial Income REIT's valuation. 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 Summit Industrial Income REIT, with the most bullish analyst valuing it at CA$13.00 and the most bearish at CA$11.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 13% revenue decline a notable change from historical growth of 34% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.7% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Summit Industrial Income REIT is expected to lag the wider industry.
The Bottom Line
The clear low-light was that the analysts cut their forecast revenue estimates for Summit Industrial Income REIT next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates 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.
At least one of Summit Industrial Income REIT's three analysts has provided estimates out to 2022, which can be seen for free on our platform here.
We don't want to rain on the parade too much, but we did also find 6 warning signs for Summit Industrial Income REIT (1 is concerning!) that you need to be mindful of.
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