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Earnings Beat: Investors Real Estate Trust Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Last week, you might have seen that Investors Real Estate Trust (NYSE:IRET) released its yearly result to the market. The early response was not positive, with shares down 8.8% to US$77.26 in the past week. Revenues were US$186m, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$6.00, an impressive 193% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Investors Real Estate Trust

NYSE:IRET Past and Future Earnings, February 22nd 2020
NYSE:IRET Past and Future Earnings, February 22nd 2020

Following last week's earnings report, Investors Real Estate Trust's six analysts are forecasting 2020 revenues to be US$188.1m, approximately in line with the last 12 months. The company is expected to report a statutory loss of US$2.06 in 2020, a sharp decline from a profit over the last year. Before this latest report, the consensus had been expecting revenues of US$192.2m and US$1.89 per share in losses. While revenue forecasts have been revised downwards, analysts look to have become more optimistic on the company's earnings power, given the to earnings per share forecasts.

The average analyst price target was broadly unchanged at US$83.50, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. The most optimistic Investors Real Estate Trust analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$77.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

It can also be useful to step back and take a broader view of how analyst forecasts compare to Investors Real Estate Trust's performance in recent years. Analysts are definitely expecting Investors Real Estate Trust's growth to accelerate, with the forecast 1.3% growth ranking favourably alongside historical growth of 0.3% per annum over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 4.9% next year. It seems obvious that, while the future growth outlook is brighter than the recent past, analysts also expect Investors Real Estate Trust to grow slower than the wider market.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Investors Real Estate Trust is moving incrementally towards profitability. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$83.50, with the latest estimates not enough to have an impact on analysts' estimated valuations.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Investors Real Estate Trust analysts - going out to 2021, and you can see them free on our platform here.

It might also be worth considering whether Investors Real Estate Trust's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.