Equity Residential (NYSE:EQR) missed earnings with its latest third-quarter results, disappointing overly-optimistic forecasters. Equity Residential missed earnings this time around, with US$622m revenue coming in 2.9% below what the analysts had modelled. Statutory earnings per share (EPS) of US$0.24 also fell short of expectations by 19%. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the 15 analysts covering Equity Residential, is for revenues of US$2.57b in 2021, which would reflect a perceptible 2.7% reduction in Equity Residential's sales over the past 12 months. Statutory earnings per share are expected to plunge 54% to US$1.17 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$2.57b and earnings per share (EPS) of US$1.24 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$59.62, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Equity Residential analyst has a price target of US$77.00 per share, while the most pessimistic values it at US$45.00. 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 Equity Residential 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. We would highlight that sales are expected to reverse, with the forecast 2.7% revenue decline a notable change from historical growth of 0.7% 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 6.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Equity Residential 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 Equity Residential. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Equity Residential going out to 2024, and you can see them free on our platform here..
Plus, you should also learn about the 5 warning signs we've spotted with Equity Residential (including 2 which are significant) .
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.
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