ARB Corporation Limited (ASX:ARB) Released Earnings Last Week And Analysts Lifted Their Price Target To AU$32.98

It's been a good week for ARB Corporation Limited (ASX:ARB) shareholders, because the company has just released its latest half-year results, and the shares gained 3.5% to AU$40.00. It was a credible result overall, with revenues of AU$284m and statutory earnings per share of AU$0.72 both in line with analyst estimates, showing that ARB is executing in line with expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for ARB

Following the latest results, ARB's six analysts are now forecasting revenues of AU$548.1m in 2021. This would be a meaningful 17% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 62% to AU$1.17. Before this earnings report, the analysts had been forecasting revenues of AU$537.4m and earnings per share (EPS) of AU$1.04 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.

The consensus price target rose 5.1% to AU$32.98, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ARB analyst has a price target of AU$42.30 per share, while the most pessimistic values it at AU$18.50. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the ARB's past performance and to peers in the same industry. The analysts are definitely expecting ARB's growth to accelerate, with the forecast 17% growth ranking favourably alongside historical growth of 4.7% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 12% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect ARB to grow faster than the wider industry.

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 ARB following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple ARB analysts - going out to 2023, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for ARB you should know about.

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