Analysts Just Slashed Their Frasers Property Limited (SGX:TQ5) EPS Numbers

The latest analyst coverage could presage a bad day for Frasers Property Limited (SGX:TQ5), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Shares are up 6.2% to S$0.94 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the current consensus, from the three analysts covering Frasers Property, is for revenues of S$3.3b in 2023, which would reflect an uneasy 15% reduction in Frasers Property's sales over the past 12 months. Statutory earnings per share are supposed to plunge 68% to S$0.07 in the same period. Previously, the analysts had been modelling revenues of S$4.0b and earnings per share (EPS) of S$0.096 in 2023. Indeed, we can see that the analysts are a lot more bearish about Frasers Property's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Frasers Property

The consensus price target fell 7.0% to S$1.18, with the weaker earnings outlook clearly leading analyst 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 Frasers Property analyst has a price target of S$1.25 per share, while the most pessimistic values it at S$1.05. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Frasers Property is an easy business to forecast or the underlying assumptions are obvious.

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. One more thing stood out to us about these estimates, and it's the idea that Frasers Property's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 15% to the end of 2023. This tops off a historical decline of 2.8% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.0% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Frasers Property to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Frasers Property's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Frasers Property.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Frasers Property analysts - going out to 2025, 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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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.

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