Irish Residential Properties REIT Plc Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Last week, you might have seen that Irish Residential Properties REIT Plc (ISE:IRES) released its full-year result to the market. The early response was not positive, with shares down 3.9% to €1.47 in the past week. It looks like a credible result overall - although revenues of €80m were what the analysts expected, Irish Residential Properties REIT surprised by delivering a (statutory) profit of €0.13 per share, an impressive 36% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Irish Residential Properties REIT after the latest results.

See our latest analysis for Irish Residential Properties REIT

After the latest results, the three analysts covering Irish Residential Properties REIT are now predicting revenues of €83.9m in 2022. If met, this would reflect a reasonable 5.2% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to crater 30% to €0.089 in the same period. In the lead-up to this report, the analysts had been modelling revenues of €83.0m and earnings per share (EPS) of €0.095 in 2022. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at €1.72, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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 Irish Residential Properties REIT at €1.75 per share, while the most bearish prices it at €1.67. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Irish Residential Properties REIT is an easy business to forecast or the the analysts are all using similar assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Irish Residential Properties REIT's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 5.2% growth on an annualised basis. This is compared to a historical growth rate of 16% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.3% annually. Factoring in the forecast slowdown in growth, it looks like Irish Residential Properties REIT is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Irish Residential Properties REIT. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Irish Residential Properties REIT analysts - going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Irish Residential Properties REIT (2 don't sit too well with us!) that you need to be mindful of.

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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.