Earnings Beat: Localiza Rent a Car S.A. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Last week, you might have seen that Localiza Rent a Car S.A. (BVMF:RENT3) released its quarterly result to the market. The early response was not positive, with shares down 5.8% to R$47.00 in the past week. Localiza Rent a Car reported R$8.7b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of R$0.69 beat expectations, being 8.6% higher than what the analysts expected. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Localiza Rent a Car

Taking into account the latest results, the current consensus from Localiza Rent a Car's ten analysts is for revenues of R$38.3b in 2024. This would reflect a major 25% increase on its revenue over the past 12 months. Per-share earnings are expected to shoot up 78% to R$3.40. In the lead-up to this report, the analysts had been modelling revenues of R$38.0b and earnings per share (EPS) of R$3.30 in 2024. So the consensus seems to have become somewhat more optimistic on Localiza Rent a Car's earnings potential following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 7.7% to R$73.92. 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. Currently, the most bullish analyst values Localiza Rent a Car at R$90.00 per share, while the most bearish prices it at R$55.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Localiza Rent a Car's rate of growth is expected to accelerate meaningfully, with the forecast 34% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 28% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Localiza Rent a Car 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 Localiza Rent a Car 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.

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. At Simply Wall St, we have a full range of analyst estimates for Localiza Rent a Car going out to 2026, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 4 warning signs for Localiza Rent a Car (2 don't sit too well with us!) that you need to be mindful of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.