Celebrations may be in order for Ares Management Corporation (NYSE:ARES) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts have sharply increased their revenue numbers, with a view that Ares Management will make substantially more sales than they’d previously expected.
Following the upgrade, the consensus from seven analysts covering Ares Management is for revenues of US$2.0b in 2021, implying an uncomfortable 16% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 50% to US$2.20. Before this latest update, the analysts had been forecasting revenues of US$1.9b and earnings per share (EPS) of US$2.21 in 2021. So it looks like there’s been no major change in sentiment in this consensus update, although the analysts have made a small increase to revenue forecasts.
The consensus price target increased 7.9% to US$70.71, with an improved revenue forecast carrying the promise of a more valuable business, in time. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Ares Management at US$74.00 per share, while the most bearish prices it at US$60.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Ares Management’s past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 21% by the end of 2021. This indicates a significant reduction from annual growth of 12% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.1% annually for the foreseeable future. It’s pretty clear that Ares Management’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Seeing the dramatic upgrade to this year’s forecasts, it might be time to take another look at Ares Management.
Analysts are definitely bullish on Ares Management, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. You can learn more, and discover the 4 other concerns we’ve identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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