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It's been a good week for Abbott Laboratories (NYSE:ABT) shareholders, because the company has just released its latest yearly results, and the shares gained 6.6% to US$120. Results overall were respectable, with statutory earnings of US$2.49 per share roughly in line with what the analysts had forecast. Revenues of US$35b came in 2.2% ahead of analyst predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Abbott Laboratories from 16 analysts is for revenues of US$40.9b in 2021 which, if met, would be a notable 18% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 57% to US$3.93. Before this earnings report, the analysts had been forecasting revenues of US$38.4b and earnings per share (EPS) of US$3.17 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a great increase in earnings per share in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 8.7% to US$130per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Abbott Laboratories, with the most bullish analyst valuing it at US$158 and the most bearish at US$82.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Abbott Laboratories' growth to accelerate, with the forecast 18% growth ranking favourably alongside historical growth of 11% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.6% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Abbott Laboratories is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Abbott Laboratories' earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Abbott Laboratories analysts - going out to 2025, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Abbott Laboratories that you should be aware of.
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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