Last week, you might have seen that Canadian Apartment Properties Real Estate Investment Trust (TSE:CAR.UN) released its annual result to the market. The early response was not positive, with shares down 5.0% to CA$56.13 in the past week. Revenues were CA$778m, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at CA$7.51, an impressive 41% ahead of estimates. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Canadian Apartment Properties Real Estate Investment Trust’s four analysts is for revenues of CA$906.1m in 2020, which would reflect a notable 16% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 43% to CA$5.34 in the same period. In the lead-up to this report, analysts had been modelling revenues of CA$902.5m and earnings per share (EPS) of CA$3.43 in 2020. Although the revenue estimates have not really changed, we can see there’s been a considerable lift to earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
There’s been no major changes to the consensus price target of CA$59.68, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock’s valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values Canadian Apartment Properties Real Estate Investment Trust at CA$66.00 per share, while the most bearish prices it at CA$43.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Canadian Apartment Properties Real Estate Investment Trust shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It’s clear from the latest estimates that Canadian Apartment Properties Real Estate Investment Trust’s rate of growth is expected to accelerate meaningfully, with forecast 16% revenue growth noticeably faster than its historical growth of 8.4%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 4.6% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Canadian Apartment Properties Real Estate Investment Trust to grow faster than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Canadian Apartment Properties Real Estate Investment Trust following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at CA$59.68, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that in mind, we wouldn’t be too quick to come to a conclusion on Canadian Apartment Properties Real Estate Investment Trust. Long-term earnings power is much more important than next year’s profits. We have forecasts for Canadian Apartment Properties Real Estate Investment Trust going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Canadian Apartment Properties Real Estate Investment Trust’s balance sheet, and whether we think Canadian Apartment Properties Real Estate Investment Trust is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at [email protected]. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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