Earnings Miss: Wharf Real Estate Investment Company Limited Missed EPS By 13% And Analysts Are Revising Their Forecasts

It's been a sad week for Wharf Real Estate Investment Company Limited (HKG:1997), who've watched their investment drop 13% to HK$38.35 in the week since the company reported its interim result. Sales were HK$7.5b beating expectations by a remarkable 23%. Statutory earnings per share (EPS) fell 13% short of estimates, at HK$0.98 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Wharf Real Estate Investment

Taking into account the latest results, the current consensus, from the 14 analysts covering Wharf Real Estate Investment, is for revenues of HK$14.5b in 2021, which would reflect an uncomfortable 11% reduction in Wharf Real Estate Investment's sales over the past 12 months. Wharf Real Estate Investment is also expected to turn profitable, with statutory earnings of HK$2.34 per share. In the lead-up to this report, the analysts had been modelling revenues of HK$14.6b and earnings per share (EPS) of HK$2.59 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

The average price target fell 7.6% to HK$42.67, 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. There are some variant perceptions on Wharf Real Estate Investment, with the most bullish analyst valuing it at HK$50.50 and the most bearish at HK$34.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that Wharf Real Estate Investment's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 20% to the end of 2021. This tops off a historical decline of 6.2% a year over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 13% per year. So while a broad number of companies are forecast to grow, unfortunately Wharf Real Estate Investment is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Wharf Real Estate Investment. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Wharf Real Estate Investment's 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Wharf Real Estate Investment analysts - going out to 2023, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Wharf Real Estate Investment that you should be aware of.

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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. 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.
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