Agree Realty Corporation (NYSE:ADC): Earnings Growth Remains Elusive

After Agree Realty Corporation’s (NYSE:ADC) recent earnings announcement in March 2018, it seems that analyst forecasts are fairly bearish, with profits predicted to drop by -8.41% next year against the past 5-year average growth rate of 27.87%. With trailing-twelve-month net income at current levels of US$59.99m, the consensus growth rate suggests that earnings will decline to US$54.94m by 2019. Below is a brief commentary around Agree Realty’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Agree Realty

What can we expect from Agree Realty in the longer term?

Over the next three years, it seems the consensus view of the 4 analysts covering ADC is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ADC’s earnings growth over these next few years.
NYSE:ADC Future Profit July 23rd 18
NYSE:ADC Future Profit July 23rd 18
This results in an annual growth rate of 8.92% based on the most recent earnings level of US$58.11m to the final forecast of US$61.24m by 2021. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $1.65 in the final year of forecast compared to the current $2.1 EPS today. The primary reason for earnings growth is due to revenue expansion of 12.04% exceeeding cost growth over time. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 49.86% to 34.06% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Agree Realty, I’ve compiled three relevant factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Agree Realty worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Agree Realty is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Agree Realty? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.