Shareholders of Ashtead Group plc (LON:AHT) will be pleased this week, given that the stock price is up 12% to UK£26.65 following its latest yearly results. Results were roughly in line with estimates, with revenues of UK£5.1b and statutory earnings per share of UK£1.62. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus, from the eleven analysts covering Ashtead Group, is for revenues of UK£4.69b in 2021, which would reflect a noticeable 7.3% reduction in Ashtead Group's sales over the past 12 months. Statutory earnings per share are expected to tumble 32% to UK£1.10 in the same period. Before this earnings report, the analysts had been forecasting revenues of UK£4.53b and earnings per share (EPS) of UK£1.43 in 2021. While next year's revenue estimates increased, there was also a large cut to EPS expectations, suggesting the consensus has a bit of a mixed view of these results.
The analysts also upgraded Ashtead Group's price target 12% to UK£26.49, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. 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 Ashtead Group analyst has a price target of UK£39.00 per share, while the most pessimistic values it at UK£17.50. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 7.3% revenue decline a notable change from historical growth of 18% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ashtead Group 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 Ashtead Group. 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.
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. We have forecasts for Ashtead Group going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Ashtead Group you should know about.
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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. Thank you for reading.