Investors in Abiomed, Inc. (NASDAQ:ABMD) had a good week, as its shares rose 8.9% to close at US$184 following the release of its full-year results. It looks like the results were a bit of a negative overall. While revenues of US$841m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 3.9% to hit US$4.43 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the nine analysts covering Abiomed, is for revenues of US$801.8m in 2021, which would reflect a measurable 4.6% reduction in Abiomed's sales over the past 12 months. Statutory earnings per share are expected to dive 23% to US$3.47 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$908.0m and earnings per share (EPS) of US$4.38 in 2021. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a pretty serious reduction to earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the US$200 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic Abiomed analyst has a price target of US$230 per share, while the most pessimistic values it at US$152. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Abiomed's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.6%, a significant reduction from annual growth of 25% 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 8.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Abiomed is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$200, with the latest estimates not enough to have an impact on their price targets.
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.
However, before you get too enthused, we've discovered 1 warning sign for Abiomed that you should be aware of.
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