Stock Analysis

Industry Analysts Just Made A Sizeable Upgrade To Their Ares Management Corporation (NYSE:ARES) Revenue Forecasts

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Shareholders in Ares Management Corporation (NYSE:ARES) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline.

After the upgrade, the consensus from Ares Management's seven analysts is for revenues of US$2.2b in 2021, which would reflect a considerable 10% decline in sales compared to the last year of performance. Per-share earnings are expected to surge 50% to US$2.20. Previously, the analysts had been modelling revenues of US$1.9b and earnings per share (EPS) of US$2.21 in 2021. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.

Check out our latest analysis for Ares Management

NYSE:ARES Earnings and Revenue Growth July 21st 2021

The consensus price target increased 7.9% to US$70.71, with an improved revenue forecast carrying the promise of a more valuable business, in time. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Ares Management analyst has a price target of US$74.00 per share, while the most pessimistic values it at US$60.00. 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.

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. We would highlight that sales are expected to reverse, with a forecast 13% annualised revenue decline to the end of 2021. That is a notable change from historical 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 1.1% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ares Management is expected to lag the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Ares Management.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 5 potential flags with Ares Management, including dilutive stock issuance over the past year. You can learn more, and discover the 4 other flags we've identified, for free on our platform here.

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