Last week, you might have seen that Asbury Automotive Group, Inc. (NYSE:ABG) released its yearly result to the market. The early response was not positive, with shares down 3.2% to US$96.33 in the past week. It was a credible result overall, with revenues of US$7.2b and statutory earnings per share of US$9.55 both in line with analyst estimates, showing that Asbury Automotive Group is executing in line with expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Asbury Automotive Group’s nine analysts is for revenues of US$8.45b in 2020, which would reflect a notable 17% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to expand 10% to US$10.64. In the lead-up to this report, analysts had been modelling revenues of US$8.82b and earnings per share (EPS) of US$10.80 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The average price target was steady at US$109 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. 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. Currently, the most bullish analyst values Asbury Automotive Group at US$130 per share, while the most bearish prices it at US$96.00. 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.
In addition, we can look to Asbury Automotive Group’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting Asbury Automotive Group’s growth to accelerate, with the forecast 17% growth ranking favourably alongside historical growth of 2.8% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 5.8% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Asbury Automotive Group is expected to grow much faster than its market.
The Bottom Line
The most obvious conclusion from these results 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. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. Still, 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 Asbury Automotive Group going out to 2022, and you can see them free on our platform here..
You can also view our analysis of Asbury Automotive Group’s balance sheet, and whether we think Asbury Automotive Group is carrying too much debt, for free on our platform here.
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