The analysts might have been a bit too bullish on Freehold Royalties Ltd. (TSE:FRU), given that the company fell short of expectations when it released its annual results last week. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CA$315m, statutory earnings missed forecasts by an incredible 45%, coming in at just CA$0.88 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Freehold Royalties

Taking into account the latest results, the consensus forecast from Freehold Royalties' three analysts is for revenues of CA$324.2m in 2024. This reflects a credible 3.1% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 30% to CA$1.14. Before this earnings report, the analysts had been forecasting revenues of CA$361.2m and earnings per share (EPS) of CA$0.90 in 2024. There's been a definite change in sentiment after these results, with the analysts delivering a to next year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is anticipated to reduce its focus on growth to enhance profitability.

There's been no real change to the average price target of CA$18.25, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Freehold Royalties, with the most bullish analyst valuing it at CA$20.00 and the most bearish at CA$16.00 per share. This is a very narrow spread of estimates, implying either that Freehold Royalties is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Freehold Royalties' revenue growth is expected to slow, with the forecast 3.1% annualised growth rate until the end of 2024 being well below the historical 27% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.9% per year. Factoring in the forecast slowdown in growth, it seems obvious that Freehold Royalties is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Freehold Royalties following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Freehold Royalties going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 1 warning sign for Freehold Royalties that you should be aware of.

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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.