Equity Residential (NYSE:EQR): Set To Experience A Decrease In Earnings?

In March 2018, Equity Residential (NYSE:EQR) released its earnings update. Generally, the consensus outlook from analysts appear pessimistic, as a -18.53% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 40.63%. Currently with a railing-twelve-month profit of US$668.43m, the consensus growth rate suggests that earnings will drop to US$544.58m by 2019. Below is a brief commentary around Equity Residential’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.

View our latest analysis for Equity Residential

How is Equity Residential going to perform in the near future?

The 15 analysts covering EQR view its longer term outlook with a negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
NYSE:EQR Future Profit July 24th 18
NYSE:EQR Future Profit July 24th 18
This results in an annual growth rate of -5.14% based on the most recent earnings level of US$600.36m to the final forecast of US$444.71m by 2021. EPS reaches $1.31 in the final year of forecast compared to the current $1.64 EPS today. Contraction in the bottom line seems to suggest cost growth exceeding top-line growth of 1.90% in the next three years. With this high cost growth, margins is expected to contract from 24.29% to 16.67% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Equity Residential, I’ve put together three important aspects 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 Equity Residential 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 Equity Residential is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Equity Residential? 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.