Yahoo Finance KAR Auction Services, Inc. Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now
It's been a good week for KAR Auction Services, Inc. (NYSE:KAR) shareholders, because the company has just released its latest annual results, and the shares gained 3.7% to US$23.25. It was not a great result overall. While revenues of US$2.8b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 11% to hit US$0.70 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
View our latest analysis for KAR Auction Services
Taking into account the latest results, the most recent consensus for KAR Auction Services from ten analysts is for revenues of US$2.90b in 2020, which is an okay 4.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to shoot up 47% to US$1.03. Before this earnings report, analysts had been forecasting revenues of US$2.91b and earnings per share (EPS) of US$1.06 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at US$26.15, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values KAR Auction Services at US$37.50 per share, while the most bearish prices it at US$18.00. 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect KAR Auction Services's revenue growth will slow down substantially, with revenues next year expected to grow 4.1%, compared to a historical growth rate of 7.7% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.3% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than KAR Auction Services.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$26.15, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for KAR Auction Services going out to 2022, and you can see them free on our platform here..
You can also view our analysis of KAR Auction Services's balance sheet, and whether we think KAR Auction Services is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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