U.S. Markets closed
  • S&P 500

    4,471.37
    +33.11 (+0.75%)
     
  • Dow 30

    35,294.76
    +382.20 (+1.09%)
     
  • Nasdaq

    14,897.34
    +73.91 (+0.50%)
     
  • Russell 2000

    2,265.65
    -8.52 (-0.37%)
     
  • Gold

    1,768.10
    -29.80 (-1.66%)
     
  • EUR/USD

    1.1606
    +0.0005 (+0.0464%)
     
  • 10-Yr Bond

    1.5760
    +0.0570 (+3.75%)
     
  • Vix

    16.30
    -0.56 (-3.32%)
     
  • GBP/USD

    1.3751
    +0.0074 (+0.5418%)
     
  • USD/JPY

    114.2000
    +0.5230 (+0.4601%)
     
  • BTC-USD

    61,300.77
    -205.88 (-0.33%)
     
  • CMC Crypto 200

    1,464.06
    +57.32 (+4.07%)
     
  • FTSE 100

    7,234.03
    +26.32 (+0.37%)
     
  • Nikkei 225

    29,068.63
    +517.70 (+1.81%)
     

Earnings Update: Here's Why Analysts Just Lifted Their Asbury Automotive Group, Inc. (NYSE:ABG) Price Target To US$110

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Asbury Automotive Group, Inc. (NYSE:ABG) last week reported its latest second-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Results were roughly in line with estimates, with revenues of US$1.4b and statutory earnings per share of US$2.57. The 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Asbury Automotive Group

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Asbury Automotive Group's eight analysts is for revenues of US$6.95b in 2020, which would reflect an okay 2.3% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 22% to US$10.10. In the lead-up to this report, the analysts had been modelling revenues of US$6.70b and earnings per share (EPS) of US$8.34 in 2020. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a very substantial lift in earnings per share in particular.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 5.1% to US$110per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Asbury Automotive Group analyst has a price target of US$128 per share, while the most pessimistic values it at US$91.00. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Next year brings more of the same, according to the analysts, with revenue forecast to grow 2.3%, in line with its 2.1% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 10.0% per year. So it's pretty clear that Asbury Automotive Group is expected to grow slower than similar companies in the same industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Asbury Automotive Group's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Asbury Automotive Group. Long-term earnings power is much more important than next year's profits. We have forecasts for Asbury Automotive Group going out to 2022, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Asbury Automotive Group (at least 1 which is concerning) , and understanding these should be part of your investment process.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.