The latest analyst coverage could presage a bad day for Asbury Automotive Group, Inc. (NYSE:ABG), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from Asbury Automotive Group's eight analysts is for revenues of US$7.0b in 2020, which would reflect a perceptible 2.6% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to plunge 22% to US$7.49 in the same period. Prior to this update, the analysts had been forecasting revenues of US$8.0b and earnings per share (EPS) of US$10.65 in 2020. Indeed, we can see that the analysts are a lot more bearish about Asbury Automotive Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 9.9% to US$88.00, with the weaker earnings outlook clearly leading analyst valuation estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Asbury Automotive Group at US$130 per share, while the most bearish prices it at US$51.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Asbury Automotive Group's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.6%, a significant reduction from annual growth of 2.8% 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 4.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Asbury Automotive Group is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Asbury Automotive Group's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Asbury Automotive Group.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Asbury Automotive Group analysts - going out to 2022, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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