Hammerson plc (LON:HMSO) Analysts Just Slashed This Year's Estimates

One thing we could say about the analysts on Hammerson plc (LON:HMSO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the eight analysts covering Hammerson, is for revenues of UK£183m in 2021, which would reflect a painful 28% reduction in Hammerson's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 71% to UK£0.22. Yet before this consensus update, the analysts had been forecasting revenues of UK£226m and losses of UK£0.13 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Hammerson

The consensus price target was broadly unchanged at UK£0.29, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 Hammerson at UK£0.90 per share, while the most bearish prices it at UK£0.10. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Hammerson's past performance and to peers in the same industry. Over the past five years, revenues have declined around 7.4% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 28% decline in revenue until the end of 2021. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.2% per year. So while a broad number of companies are forecast to grow, unfortunately Hammerson is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Hammerson after the downgrade.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Hammerson's financials, such as major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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