The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has come in for a hard landing today as its among the worst performers on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index on worries that it'll issue a disappointing profit result later this month.
The SYD share price tumbled 2.1% to $6.45 this morning when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is up 0.5%.
The loss isn't as bad as those experienced by the Boral Limited (ASX: BLD) share price, Costa Group Holdings Ltd (ASX: CGC) share price or Xero Limited (ASX: XRO), but that will be little comfort to nervous dividend-loving shareholders of Sydney Airport – especially after Credit Suisse downgraded the stock to "underperform" from "neutral" today.
Dividend hard landing
"Based on expectations of slowing air travel demand, international airlines are cutting capacity plans for 2019," said Credit Suisse.
"We lower international and domestic passenger growth forecasts to 0%, from 5% and 2% respectively. Our dividend forecasts fall 4% to A¢38 for 2019 and 9% for 2020."
If Credit Suisse is on the money, investors should adopt the brace position as the stock is likely to come under pressure as consensus dividend expectations are around 5% and 11% above what Credit Suisse is tipping in 2019 and 2020, respectively.
The broker is forecasting Sydney Airport to announce a full year (its financial year is the same as the calendar year) earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.28 billion, net operating receipts of 38 cents per share and capex of $400 million, which is at the top end of management's guidance, on February 21.
Credit Suisse isn't the only broker warning of the potential for Sydney Airport to deliver a disappointing result at this month's profit season.
Morgans has also put the stock on its watchlist of potential sinners during the reporting season.
Foolish takeaway
The slowing Chinese economy is prompting tourists from that nation to favour cheaper Asian destinations and growth in Chinese arrivals has been a major earnings contributor to Sydney Airport.
There's also the Productivity Commission's review into airports. There's a risk that the regulatory environment for airport operators around the country could become more onerous.
Credit Suisse thinks it's a low risk event but until the outcome of the review is known, no one should discount a negative outcome for Sydney Airport.
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