The second-quarter results for Alimentation Couche-Tard Inc. (TSE:ATD.B) were released last week, making it a good time to revisit its performance. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at US$11b, statutory earnings beat expectations by a notable 33%, coming in at US$0.68 per share. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the recent earnings report, the consensus from eleven analysts covering Alimentation Couche-Tard is for revenues of US$45.7b in 2021, implying a small 2.1% decline in sales compared to the last 12 months. Statutory earnings per share are expected to plunge 21% to US$1.97 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$47.5b and earnings per share (EPS) of US$1.80 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
The consensus has made no major changes to the price target of US$40.26, 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 Alimentation Couche-Tard, with the most bullish analyst valuing it at US$55.00 and the most bearish at US$49.33 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.1%, a significant reduction from annual growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.9% next year. It's pretty clear that Alimentation Couche-Tard's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Alimentation Couche-Tard'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. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 forecasts for Alimentation Couche-Tard going out to 2025, 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 2 warning signs for Alimentation Couche-Tard that you need to be mindful of.
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