U.S. markets closed

Alimentation Couche-Tard Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Simply Wall St

There's been a notable change in appetite for Alimentation Couche-Tard Inc. (TSE:ATD.B) shares in the week since its quarterly report, with the stock down 13% to CA$33.63. Revenues were US$17b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.59, an impressive 34% ahead of estimates. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Alimentation Couche-Tard

TSX:ATD.B Past and Future Earnings, March 21st 2020

Taking into account the latest results, the current consensus, from the nine analysts covering Alimentation Couche-Tard, is for revenues of US$54.6b in 2021, which would reflect a small 5.2% reduction in Alimentation Couche-Tard's sales over the past 12 months. Statutory earnings per share are expected to shrink 9.7% to US$1.66 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$58.3b and earnings per share (EPS) of US$1.88 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share numbers.

The consensus price target fell 14% to US$30.95, with the weaker earnings outlook clearly leading valuation estimates. 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. The most optimistic Alimentation Couche-Tard analyst has a price target of US$36.57 per share, while the most pessimistic values it at US$27.55. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Alimentation Couche-Tard is an easy business to forecast or that the the analysts are all using similar assumptions.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 5.2% revenue decline a notable change from historical growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Alimentation Couche-Tard is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Alimentation Couche-Tard. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 Alimentation Couche-Tard going out to 2024, and you can see them free on our platform here..

It is also worth noting that we have found 2 warning signs for Alimentation Couche-Tard that you need to take into consideration.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.