Farmland Partners Inc. (NYSE:FPI) Released Earnings Last Week And Analysts Lifted Their Price Target To US$15.20

By
Simply Wall St
Published
May 07, 2022
NYSE:FPI
Source: Shutterstock

It's been a good week for Farmland Partners Inc. (NYSE:FPI) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.2% to US$15.19. Revenues beat expectations, coming in 9.2% ahead of forecasts, and the company broke even on a statutory earnings per share (EPS) level. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Farmland Partners

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NYSE:FPI Earnings and Revenue Growth May 7th 2022

After the latest results, the consensus from Farmland Partners' four analysts is for revenues of US$52.6m in 2022, which would reflect a measurable 2.7% decline in sales compared to the last year of performance. Earnings are expected to improve, with Farmland Partners forecast to report a statutory profit of US$0.045 per share. In the lead-up to this report, the analysts had been modelling revenues of US$53.6m and earnings per share (EPS) of US$0.21 in 2022. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 8.6% to US$15.20, suggesting the revised estimates are not indicative of a weaker long-term future for the business. 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. The most optimistic Farmland Partners analyst has a price target of US$16.00 per share, while the most pessimistic values it at US$12.00. 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.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.6% by the end of 2022. This indicates a significant reduction from annual growth of 4.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Farmland Partners is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Farmland Partners. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Farmland Partners' revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Farmland Partners. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Farmland Partners analysts - going out to 2024, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 3 warning signs for Farmland Partners (of which 2 are concerning!) you should know about.

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