Earnings Miss: Guangzhou R&F Properties Co., Ltd. Missed EPS By 16% And Analysts Are Revising Their Forecasts

It's shaping up to be a tough period for Guangzhou R&F Properties Co., Ltd. (HKG:2777), which a week ago released some disappointing full-year results that could have a notable impact on how the market views the stock. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CN¥91b, statutory earnings missed forecasts by 16%, coming in at just CN¥3.00 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Guangzhou R&F Properties

Taking into account the latest results, the most recent consensus for Guangzhou R&F Properties from 14 analysts is for revenues of CN¥107.1b in 2020 which, if met, would be a meaningful 18% increase on its sales over the past 12 months. Statutory earnings per share are predicted to expand 12% to CN¥3.37. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥118.9b and earnings per share (EPS) of CN¥4.17 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.

The consensus price target fell 11% to CN¥14.23, with the weaker earnings outlook clearly leading valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Guangzhou R&F Properties analyst has a price target of CN¥22.17 per share, while the most pessimistic values it at CN¥8.21. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. Next year brings more of the same, according to the analysts, with revenue forecast to grow 18%, in line with its 18% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 15% next year. So although Guangzhou R&F Properties is expected to maintain its revenue growth rate, it's only growing at about the rate of 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 Guangzhou R&F Properties. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Guangzhou R&F Properties. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Guangzhou R&F Properties analysts - going out to 2022, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Guangzhou R&F Properties (1 can't be ignored!) that you need to be mindful of.

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