Earnings Beat: AutoNation, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St
·4 min read

AutoNation, Inc. (NYSE:AN) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 4.2% to hit US$5.4b. AutoNation also reported a statutory profit of US$2.05, which was an impressive 34% above what the analysts had forecast. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for AutoNation

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Taking into account the latest results, the most recent consensus for AutoNation from eleven analysts is for revenues of US$21.3b in 2021 which, if met, would be a credible 5.6% increase on its sales over the past 12 months. Statutory earnings per share are predicted to bounce 51% to US$6.56. In the lead-up to this report, the analysts had been modelling revenues of US$21.1b and earnings per share (EPS) of US$6.03 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$68.00, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on AutoNation, with the most bullish analyst valuing it at US$78.00 and the most bearish at US$54.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that AutoNation's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 5.6%, well above its historical decline of 0.4% a year 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 revenue grow 9.1% per year. Although AutoNation's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.

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 AutoNation following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that AutoNation's revenues are expected to perform worse than the wider industry. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for AutoNation going out to 2022, and you can see them free on our platform here.

Even so, be aware that AutoNation is showing 4 warning signs in our investment analysis , 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.

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