Corporate Office Properties Trust (NYSE:OFC) shareholders are probably feeling a little disappointed, since its shares fell 8.1% to US$22.43 in the week after its latest third-quarter results. Revenues of US$155m beat expectations by a respectable 5.1%, although statutory losses per share increased. Corporate Office Properties Trust lost US$0.29, which was 71% more than what the analysts had included in their models. 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. NYSE:OFC Earnings and Revenue Growth November 2nd 2020
Following the latest results, Corporate Office Properties Trust's four analysts are now forecasting revenues of US$623.2m in 2021. This would be a modest 3.0% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 85% to US$0.96. Before this earnings report, the analysts had been forecasting revenues of US$623.1m and earnings per share (EPS) of US$0.94 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of US$29.08, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Corporate Office Properties Trust analyst has a price target of US$34.00 per share, while the most pessimistic values it at US$24.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. The analysts are definitely expecting Corporate Office Properties Trust's growth to accelerate, with the forecast 3.0% growth ranking favourably alongside historical growth of 0.7% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 5.9% next year. So it's clear that despite the acceleration in growth, Corporate Office Properties Trust is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Corporate Office Properties Trust's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Corporate Office Properties Trust's revenues are expected to 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. We have forecasts for Corporate Office Properties Trust going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Corporate Office Properties Trust (1 is potentially serious!) that you need to take into consideration.
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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