It's been a good week for Easterly Government Properties, Inc. (NYSE:DEA) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.3% to US$21.82. It was a credible result overall, with revenues of US$61m and statutory earnings per share of US$0.05 both in line with analyst estimates, showing that Easterly Government Properties is executing in line with expectations. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Easterly Government Properties' four analysts are now forecasting revenues of US$268.0m in 2021. This would be a notable 11% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 88% to US$0.27. Before this earnings report, the analysts had been forecasting revenues of US$268.2m and earnings per share (EPS) of US$0.20 in 2021. Although the revenue estimates have not really changed, we can see there's been a considerable lift to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target was unchanged at US$27.10, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values Easterly Government Properties at US$31.50 per share, while the most bearish prices it at US$24.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Easterly Government Properties' revenue growth will slow down substantially, with revenues next year expected to grow 11%, compared to a historical growth rate of 25% 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) 5.9% next year. Even after the forecast slowdown in growth, it seems obvious that Easterly Government Properties is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Easterly Government Properties following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$27.10, with the latest estimates not enough to have an impact on their price targets.
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 forecasts for Easterly Government Properties going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Easterly Government Properties (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.
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