Investors in Welltower Inc. (NYSE:WELL) had a good week, as its shares rose 4.6% to close at US$64.93 following the release of its yearly results. Welltower reported US$4.6b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$2.33 beat expectations, being 9.5% higher than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Welltower after the latest results.
Taking into account the latest results, the current consensus, from the five analysts covering Welltower, is for revenues of US$4.51b in 2021, which would reflect a discernible 2.1% reduction in Welltower's sales over the past 12 months. Statutory earnings per share are forecast to plummet 79% to US$0.54 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$4.51b and earnings per share (EPS) of US$0.64 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the substantial drop in new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$63.98, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Welltower, with the most bullish analyst valuing it at US$72.00 and the most bearish at US$56.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 2.1% revenue decline a notable change from historical growth of 4.8% 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 5.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Welltower is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$63.98, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Welltower analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 5 warning signs for Welltower (2 are a bit concerning!) that we have uncovered.
If you’re looking to trade Welltower, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.