Analyst Forecasts Just Became More Bearish On Henderson Land Development Company Limited (HKG:12)

The latest analyst coverage could presage a bad day for Henderson Land Development Company Limited (HKG:12), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from Henderson Land Development's eleven analysts is for revenues of HK$29b in 2023, which would reflect a notable 13% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 29% to HK$2.47. Previously, the analysts had been modelling revenues of HK$35b and earnings per share (EPS) of HK$2.70 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a minor downgrade to EPS estimates to boot.

See our latest analysis for Henderson Land Development

Analysts made no major changes to their price target of HK$31.04, suggesting the downgrades are not expected to have a long-term impact on Henderson Land Development's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Henderson Land Development at HK$49.00 per share, while the most bearish prices it at HK$23.30. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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 Henderson Land Development is forecast to grow faster in the future than it has in the past, with revenues expected to display 13% annualised growth until the end of 2023. If achieved, this would be a much better result than the 0.6% annual decline 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 9.5% annually. Not only are Henderson Land Development's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Henderson Land Development. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Henderson Land Development going forwards.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Henderson Land Development analysts - going out to 2025, 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.