Time To Worry? Analysts Are Downgrading Their Auckland International Airport Limited (NZSE:AIA) Outlook

Market forces rained on the parade of Auckland International Airport Limited (NZSE:AIA) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the seven analysts covering Auckland International Airport, is for revenues of NZ$266m in 2021, which would reflect a not inconsiderable 15% reduction in Auckland International Airport's sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of NZ$0.0043 in 2021, a sharp decline from a profit over the last year. Yet prior to the latest estimates, the analysts had been forecasting revenues of NZ$296m and losses of NZ$0.0026 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Auckland International Airport

The consensus price target was broadly unchanged at NZ$7.06, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Auckland International Airport analyst has a price target of NZ$7.61 per share, while the most pessimistic values it at NZ$6.50. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Auckland International Airport's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 27% to the end of 2021. This tops off a historical decline of 0.4% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 11% annually. So while a broad number of companies are forecast to grow, unfortunately Auckland International Airport is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Auckland International Airport. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Auckland International Airport's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Auckland International Airport after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Auckland International Airport 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. 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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