The Unite Group plc (LON:UTG) Analysts Are Way More Bearish Than They Used To Be

Market forces rained on the parade of The Unite Group plc (LON:UTG) shareholders today, when the analysts downgraded their forecasts for this year. 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. Surprisingly the share price has been buoyant, rising 23% to UK£7.99 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the latest consensus from Unite Group's four analysts is for revenues of UK£283m in 2021, which would reflect a substantial 41% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting UK£0.64 in per-share earnings UK£0.64. Previously, the analysts had been modelling revenues of UK£287m and earnings per share (EPS) of UK£1.22 in 2021. So there's definitely been a decline in analyst sentiment in the latest consensus numbers, noting the pretty serious decline to EPS forecasts.

View our latest analysis for Unite Group

The consensus price target fell 7.4% to UK£11.93, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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. The most optimistic Unite Group analyst has a price target of UK£13.60 per share, while the most pessimistic values it at UK£9.32. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that Unite Group is forecast to grow faster in the future than it has in the past, with revenues expected to grow 41%. If achieved, this would be a much better result than the 1.4% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 4.7% per year. So it looks like Unite Group is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Unite Group's revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Unite Group.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Unite Group going out to 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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