Thursday, February 23, 2012

Xinyuan Real Estate Q1 2012 Earnings Estimates

One thing that was very interesting to take away from XIN's Q4 2011 earnings release was the company's projections for Q1 2012 revenue.  This quarter is traditionally the slowest of the year, reflecting seasonality and the Chinese New year, which basically throws off all economic activity for several weeks. 

In his most recent report on XIN, Kun Tao at Roth Capital had estimated $0.16 per ADS in earnings for Q1 2012, on net income of $12m and revenue of $95m. 

However, the company in its Q4 earnings release projects net income for Q1 in the range of $18m to $21m with revenue between $135m and $145m, which would translate into earnings of $0.24 to $0.28 per ADS, perhaps a little more with additional shares repurchased. 

That's a pretty big gap between what Mr. Tao estimates and what the company is projecting, and we might expect to see Kun's report following Q4 earnings to revise up his estimates for Q1 a bit.

The company has now beat the street's earnings expectations for the last 11 out of 12 quarters, and it is likely that the guidance for Q1 2012 is sound, since it is coming near the end of February, and therefore the quarter is nearly 2/3 done. 

In the last three years, the only time the company has missed the street's expectations was in the third quarter of 2010.  In this case, the company had reported the prior quarter's earnings on August 10, 2010, and thus had completed less than half of the third quarter when it made its projections. 

Anyway, this guidance gives a hint as to why Tom suggested on the conference call that $100m in net income for 2012 is a conservative number. Projecting approximately $20m in net income in a quarter that is traditionally extremely slow compared to the remaining quarters is very bullish for 2012.  For some perspective, in 2011, Q1 net income was $11.6m, whereas Q2 was $31.8m, Q3 was $31.2m, and Q4 was $28.3m. 

Disclosure: Long $XIN

No comments:

Post a Comment