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Last week, you might have seen that Amneal Pharmaceuticals, Inc. (NYSE:AMRX) released its third-quarter result to the market. The early response was not positive, with shares down 8.5% to US$4.19 in the past week. Revenues of US$519m beat expectations by a respectable 7.7%, although statutory losses per share increased. Amneal Pharmaceuticals lost US$0.06, which was 500% more than what the analysts had included in their models. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Amneal Pharmaceuticals after the latest results.
Taking into account the latest results, the current consensus from Amneal Pharmaceuticals' eleven analysts is for revenues of US$2.04b in 2021, which would reflect a solid 8.7% increase on its sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$0.18 per share in 2021. Before this earnings report, the analysts had been forecasting revenues of US$2.00b and earnings per share (EPS) of US$0.20 in 2021. Yet despite a modest lift to revenues, the analysts are now forecasting a loss instead of a profit, which looks like a reduction in sentiment after the latest results.
The consensus price target stayed unchanged at US$4.44, seeming to suggest that higher forecast losses are not expected to have a long term impact on the 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 Amneal Pharmaceuticals analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$3.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Amneal Pharmaceuticals' revenue growth is expected to slow, with forecast 8.7% increase next year well below the historical 17%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.7% next year. Even after the forecast slowdown in growth, it seems obvious that Amneal Pharmaceuticals is also expected to grow faster than the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Amneal Pharmaceuticals dropped from profits to a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Amneal Pharmaceuticals analysts - going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 4 warning signs for Amneal Pharmaceuticals (2 are significant!) 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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