As you might know, Inchcape plc (LON:INCH) recently reported its half-yearly numbers. The results were positive, with revenue coming in at UK£3.9b, beating analyst expectations by 6.1%. 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 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 the six analysts covering Inchcape, is for revenues of UK£7.35b in 2021, which would reflect a small 5.2% reduction in Inchcape's sales over the past 12 months. Per-share earnings are expected to shoot up 65% to UK£0.31. Before this earnings report, the analysts had been forecasting revenues of UK£7.31b and earnings per share (EPS) of UK£0.33 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
The consensus price target held steady at UK£9.78, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on Inchcape, with the most bullish analyst valuing it at UK£10.46 and the most bearish at UK£9.10 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Inchcape's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Inchcape's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 10% to the end of 2021. This tops off a historical decline of 0.9% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.3% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Inchcape to suffer worse than 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 Inchcape. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Inchcape's revenues are expected to perform worse than the wider industry. The consensus price target held steady at UK£9.78, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Inchcape. Long-term earnings power is much more important than next year's profits. We have forecasts for Inchcape going out to 2023, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Inchcape that we have uncovered.
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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