Need To Know: The Consensus Just Cut Its Hongkong Land Holdings Limited (SGX:H78) Estimates For 2022

Market forces rained on the parade of Hongkong Land Holdings Limited (SGX:H78) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 6.7% to US$5.22 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the current consensus, from the 13 analysts covering Hongkong Land Holdings, is for revenues of US$2.2b in 2022, which would reflect a definite 9.2% reduction in Hongkong Land Holdings' sales over the past 12 months. Per-share earnings are expected to step up 10% to US$0.40. Prior to this update, the analysts had been forecasting revenues of US$2.4b and earnings per share (EPS) of US$0.43 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

Check out our latest analysis for Hongkong Land Holdings

Analysts made no major changes to their price target of US$6.14, suggesting the downgrades are not expected to have a long-term impact on Hongkong Land Holdings' valuation. 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 Hongkong Land Holdings, with the most bullish analyst valuing it at US$7.80 and the most bearish at US$4.75 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Hongkong Land Holdings' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 18% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 3.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.5% annually for the foreseeable future. It's pretty clear that Hongkong Land Holdings' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Hongkong Land Holdings after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Hongkong Land Holdings going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.