Avis Budget Group, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
Shareholders of Avis Budget Group, Inc. (NASDAQ:CAR) will be pleased this week, given that the stock price is up 16% to US$47.94 following its latest annual results. Revenues were US$9.2b, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$3.98, an impressive 60% ahead of estimates. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
View our latest analysis for Avis Budget Group
Following the latest results, Avis Budget Group's six analysts are now forecasting revenues of US$9.52b in 2020. This would be an okay 3.8% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$4.02, roughly flat on the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$9.33b and earnings per share (EPS) of US$2.85 in 2020. So it seems there's been a definite increase in optimism about Avis Budget Group's future following the latest results, with a considerable lift to the earnings per share forecasts in particular.
With these upgrades, we're not surprised to see that analysts have lifted their price target 29% to US$48.75 per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Avis Budget Group analyst has a price target of US$60.00 per share, while the most pessimistic values it at US$31.00. 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.
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 clear from the latest estimates that Avis Budget Group's rate of growth is expected to accelerate meaningfully, with forecast 3.8% revenue growth noticeably faster than its historical growth of 1.8%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 6.0% next year. So it's clear that despite the acceleration in growth, Avis Budget Group is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Avis Budget Group following these results. Fortunately, analysts also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts 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 Avis Budget Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Avis Budget Group analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Avis Budget Group is carrying too much debt, and whether its balance sheet is healthy, 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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