Today is shaping up negative for Hongkong Land Holdings Limited (SGX:H78) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. The stock price has risen 6.7% to US$5.22 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the consensus from 13 analysts covering Hongkong Land Holdings is for revenues of US$2.2b in 2022, implying a considerable 9.2% decline in sales compared to the last 12 months. Per-share earnings are expected to swell 10% to US$0.40. Before this latest update, the analysts had been forecasting revenues of US$2.4b and earnings per share (EPS) of US$0.43 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

View our latest analysis for Hongkong Land Holdings

Despite the cuts to forecast earnings, there was no real change to the US$6.14 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Hongkong Land Holdings analyst has a price target of US$7.80 per share, while the most pessimistic values it at US$4.75. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 18% by the end of 2022. This indicates a significant reduction from annual growth of 3.0% 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 6.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Hongkong Land Holdings is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Hongkong Land Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Hongkong Land Holdings' 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 Hongkong Land Holdings going forwards.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Hongkong Land Holdings analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.