On Friday, Eagers Automotive Ltd received a revised price target from Jefferies, now set at AUD10.80, up from the previous target of AUD10.60. Despite this increase, the firm continues to hold a cautious stance on the stock, maintaining a Hold rating.
The adjustment comes after a recent trading update from PWR last week, which pointed to challenging conditions in the automotive industry. The update mentioned "growing industry headwinds," specifically citing an oversupply of new vehicles in Australia that is impacting gross profit (GP) margins, along with a downturn in consumer demand for new vehicles.
In anticipation of these challenges, Jefferies has proactively reduced its forecasts for Eagers Automotive. The firm has slightly increased its revenue growth expectations by about 2% to account for recent mergers and acquisitions but has also decreased the GP margins by 60 basis points.
These revisions have led to a decrease in the projected earnings per share (EPS) for the fiscal years 2025 and 2026, with estimates showing a 10% reduction for FY25 and an 8% reduction for FY26. Despite these cuts, the price target has been marginally lifted to AUD10.80, reflecting higher comparative multiples in the United States.
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