This Analyst Just Downgraded Their The Hongkong and Shanghai Hotels, Limited (HKG:45) EPS Forecasts

Market forces rained on the parade of The Hongkong and Shanghai Hotels, Limited (HKG:45) shareholders today, when the covering analyst downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

Following the downgrade, the latest consensus from Hongkong and Shanghai Hotels' sole analyst is for revenues of HK$3.0b in 2021, which would reflect a meaningful 13% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 37% to HK$0.46. Yet before this consensus update, the analyst had been forecasting revenues of HK$3.6b and losses of HK$0.33 per share in 2021. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Hongkong and Shanghai Hotels

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Hongkong and Shanghai Hotels' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 13% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 10% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 29% annually for the foreseeable future. Although Hongkong and Shanghai Hotels' revenues are expected to improve, it seems that the analyst is still bearish on the business, forecasting it to grow slower than the broader industry.

The Bottom Line

The most important thing to take away is that the analyst increased their loss per share estimates for this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Hongkong and Shanghai Hotels' revenues are expected to grow slower than the wider market. After a cut like that, investors could be forgiven for thinking the analyst is a lot more bearish on Hongkong and Shanghai Hotels, and a few readers might choose to steer clear of the stock.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Hongkong and Shanghai Hotels going out as far as 2022, 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.

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