Profit forecasts for Sherry FitzGerald and Irish Life Permanent have been cut by Davy Stockbrokers. The broker has halved its 2001 earnings per share (EPS) forecast for estate agents Sherry FitzGerald and more than halved its forecast for 2002. It is forecasting earnings per share of 6.5 cents for 2001, down from 13 cents, and 5.3 cents for 2002, down from 13.6 cents.

The downgrade follows two profit warnings from Sherry FitzGerald in recent months. At the end of September, the company warned it would not meet analysts' profits expectations for the year. This was followed by a warning blaming weakness in the commercial property market.

Analyst Mr Flor O'Donoghue warned the group would record "a significant loss" for the second half of 2001 following a first-half profit of €1.7 million after tax. The company expected a full-year 2001 profit of €600,000 (£472,538) after tax and minority interests, he said. He said this figure would include an exceptional gain of €250,000 (£196,891). The company reported 2000 profits after tax and minorities of €4.3 million.

The Sherry FitzGerald figures are a graphic reflection of the slowdown in the Irish commercial property market and in the residential market, where falling house prices and lower transaction levels are having "a double whammy" impact on the estate agents' income stream, he said.

"The real challenge for management now is to adapt successfully the operating base of the group to the changed environment, otherwise the risk is that the group will remain loss-making in 2002. That said, the recent Budget has boosted transaction levels at the €254,000 or under level, which indicates the investor has returned to the market and this will help Sherry FitzGerald in 2002," he said. Sherry FitzGerald shares are trading around €1, down from a 2001 high of €2.25. The company is expected to report its 2001 results in March or April.

Davy cut its 2001 EPS forecast for Irish Life & Permanent to 82.3 cents from 91.8 cents following the company's warning that it would not meet some market forecasts because of weak investment markets. But Davy, which is broker to Irish Life & Permanent, raised its 2002 forecast to 102.7 cent from 95.5 cents and reiterated its share price target of €12.50. Irish Life & Permanent shares are currently trading around €11.90.

Analyst Ms Emer Lang said the group had strong defensive merits. The company whose year-end is December, is expected to report 2001 results in March.