Penske Automotive Group, Inc. (NYSE:PAG) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$6.0b, some 6.9% above estimates, and statutory earnings per share (EPS) coming in at US$3.07, 91% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Penske Automotive Group's ten analysts is for revenues of US$22.3b in 2021, which would reflect a decent 8.6% increase on its sales over the past 12 months. Per-share earnings are expected to accumulate 10.0% to US$6.07. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$22.0b and earnings per share (EPS) of US$5.66 in 2021. So the consensus seems to have become somewhat more optimistic on Penske Automotive Group's earnings potential following these results.
The consensus price target rose 9.7% to US$63.00, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. There are some variant perceptions on Penske Automotive Group, with the most bullish analyst valuing it at US$84.00 and the most bearish at US$47.00 per share. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Penske Automotive Group's past performance and to peers in the same industry. It's clear from the latest estimates that Penske Automotive Group's rate of growth is expected to accelerate meaningfully, with the forecast 8.6% revenue growth noticeably faster than its historical growth of 3.0%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 9.1% per year. Penske Automotive Group is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Penske Automotive Group following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Penske Automotive Group going out to 2022, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for Penske Automotive Group (of which 1 is concerning!) you should know about.
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 firstname.lastname@example.org.