Yahoo Finance Digital Realty Trust, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
As you might know, Digital Realty Trust, Inc. (NYSE:DLR) recently reported its quarterly numbers. The results were mixed; although revenues of US$823m fell 15% short of what the analysts had predicted, per-share (statutory) earnings of US$2.35 beat expectations by 21%. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Digital Realty Trust after the latest results.
Check out our latest analysis for Digital Realty Trust
Taking into account the latest results, the most recent consensus for Digital Realty Trust from nine analysts is for revenues of US$3.79b in 2020 which, if met, would be a major 21% increase on its sales over the past 12 months. Statutory earnings per share are forecast to tumble 37% to US$1.80 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$3.80b and earnings per share (EPS) of US$0.92 in 2020. Although the revenue estimates have not really changed, we can see there's been a very substantial lift in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target was unchanged at US$146, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. There are some variant perceptions on Digital Realty Trust, with the most bullish analyst valuing it at US$170 and the most bearish at US$118 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. It's clear from the latest estimates that Digital Realty Trust's rate of growth is expected to accelerate meaningfully, with the forecast 21% revenue growth noticeably faster than its historical growth of 15%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.8% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Digital Realty Trust to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Digital Realty Trust's earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$146, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Digital Realty Trust. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Digital Realty Trust analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Digital Realty Trust has 4 warning signs (and 1 which is concerning) we think you should know about.
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