Results: Eagers Automotive Limited Exceeded Expectations And The Consensus Has Updated Its Estimates

Investors in Eagers Automotive Limited (ASX:APE) had a good week, as its shares rose 4.0% to close at AU$13.94 following the release of its annual results. Eagers Automotive missed revenue estimates by 4.4%, with sales of AU$8.7b, although statutory earnings per share (EPS) of AU$1.25 beat expectations, coming in 6.9% ahead of analyst estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Eagers Automotive after the latest results.

See our latest analysis for Eagers Automotive

Following last week's earnings report, Eagers Automotive's 13 analysts are forecasting 2022 revenues to be AU$8.79b, approximately in line with the last 12 months. Statutory earnings per share are expected to sink 18% to AU$1.04 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$9.37b and earnings per share (EPS) of AU$0.95 in 2022. While revenue forecasts have been revised downwards, the analysts look to have become more optimistic on the company's cost base, given the decent improvement in to the earnings per share numbers.

The consensus has made no major changes to the price target of AU$16.02, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 Eagers Automotive, with the most bullish analyst valuing it at AU$18.35 and the most bearish at AU$11.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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 pretty clear that there is an expectation that Eagers Automotive's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 0.7% growth on an annualised basis. This is compared to a historical growth rate of 23% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.1% annually. Factoring in the forecast slowdown in growth, it seems obvious that Eagers Automotive is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Eagers Automotive's earnings potential next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the intrinsic value of the business. The consensus price target held steady at AU$16.02, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Eagers Automotive 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 - Eagers Automotive has 3 warning signs (and 1 which is potentially serious) we think you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.