On Tuesday, Jefferies adjusted its stance on Eagers Automotive Ltd (ASX:APE), upgrading the company's stock from Underperform to Hold. The firm also revised the price target to AUD10.40, down from the previous target of AUD10.80. This change follows the company's annual general meeting last week, during which Eagers Automotive reaffirmed its revenue guidance for the fiscal year 2024 at AUD11 billion.
The automotive retailer is experiencing a period of higher costs and increased interest expenses. These challenges have arisen even as the company anticipates benefits from real estate optimization and the rollout of new technology, which were highlighted in the fiscal year 2023 results. Despite these strategic initiatives, Eagers Automotive has indicated that its profit before tax (PBT) for the first half of 2024 is expected to be 85% of the first half of 2023. This projection is a downward revision from Jefferies' previous forecast, which estimated the PBT would be around 95% of the prior comparable period.
In response to these developments, Jefferies has revised its earnings per share (EPS) estimates for Eagers Automotive for the fiscal years 2024 to 2026, reducing them by 4% across the board. The lowered price target to AUD10.40 reflects a slight decrease from the former target of AUD10.90.
The rationale behind the upgrade to Hold is based on the current stock price's proximity to the revised target, with a minor downside of approximately 2% to the new price target.
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