Abiomed, Inc. (NASDAQ:ABMD) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of US$222m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of US$1.51 an impressive 39% ahead of estimates. Following the result, 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 analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Abiomed's nine analysts is for revenues of US$952.7m in 2021, which would reflect a decent 13% increase on its sales over the past 12 months. Statutory earnings per share are forecast to sink 12% to US$4.77 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.03b and earnings per share (EPS) of US$5.21 in 2021. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a minor downgrade to earnings per share estimates.
Analysts made no major changes to their price target of US$220, suggesting the downgrades are not expected to have a long-term impact on Abiomed's valuation. 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. The most optimistic Abiomed analyst has a price target of US$240 per share, while the most pessimistic values it at US$198. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to Abiomed's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that Abiomed's revenue growth is expected to slow, with forecast 13% increase next year well below the historical 27%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.8% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkAbiomed will grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Abiomed. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Abiomed's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$220, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Abiomed. Long-term earnings power is much more important than next year's profits. We have forecasts for Abiomed going out to 2024, and you can see them free on our platform here.
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