Stock Analysis

Ares Management Corporation Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

Source: Shutterstock

It's been a mediocre week for Ares Management Corporation (NYSE:ARES) shareholders, with the stock dropping 12% to US$66.22 in the week since its latest quarterly results. Revenues came in 7.6% below expectations, at US$559m. Statutory earnings per share were relatively better off, with a per-share profit of US$0.65 being roughly in line with analyst estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Ares Management after the latest results.

See our latest analysis for Ares Management

NYSE:ARES Earnings and Revenue Growth May 1st 2022

After the latest results, the consensus from Ares Management's eight analysts is for revenues of US$2.94b in 2022, which would reflect a disturbing 31% decline in sales compared to the last year of performance. Statutory earnings per share are predicted to shoot up 179% to US$3.44. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.03b and earnings per share (EPS) of US$3.24 in 2022. 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$93.36, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Ares Management, with the most bullish analyst valuing it at US$110 and the most bearish at US$82.00 per share. This is a very narrow spread of estimates, implying either that Ares Management is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 39% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 26% 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 5.1% per year. It's pretty clear that Ares Management'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 Ares Management's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Yet - earnings 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Ares Management going out to 2024, and you can see them free on our platform here..

Plus, you should also learn about the 5 warning signs we've spotted with Ares Management (including 2 which can't be ignored) .

Valuation is complex, but we're helping make it simple.

Find out whether Ares Management is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis