The Hammerson plc (LON:HMSO) Analysts Have Been Trimming Their Sales Forecasts –

The latest analyst coverage could presage a bad day for Hammerson plc (LON:HMSO), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Surprisingly the share price has been buoyant, rising 11% to UK£0.23 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

After the downgrade, the consensus from Hammerson’s eleven analysts is for revenues of UK£197m in 2022, which would reflect a painful 28% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 81% to UK£0.017. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£238m and losses of UK£0.017 per share in 2022. We can see there’s definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to this year’s revenue estimates, while at the same time reducing their loss estimates.

View our latest analysis for Hammerson

There was no major change to the UK£0.27 average analyst price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. 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 Hammerson analyst has a price target of UK£0.43 per share, while the most pessimistic values it at UK£0.13. So we wouldn’t be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn’t rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. Over the past five years, revenues have declined around 14% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 49% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 6.0% annually. So while a broad number of companies are forecast to grow, unfortunately Hammerson is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Hammerson’s revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year’s forecasts, we’d be feeling a little more wary of Hammerson going forwards.

Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Hammerson analysts – going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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