Last week saw the newest quarterly earnings release from Bristol-Myers Squibb Company (NYSE:BMY), an important milestone in the company's journey to build a stronger business. The results were positive, with revenue coming in at US$11b, beating analyst expectations by 7.3%. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Bristol-Myers Squibb from 13 analysts is for revenues of US$41.7b in 2020 which, if met, would be a sizeable 34% increase on its sales over the past 12 months. Statutory earnings per share are predicted to step up 11% to US$0.57. In the lead-up to this report, the analysts had been modelling revenues of US$41.7b and earnings per share (EPS) of US$0.78 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
It might be a surprise to learn that the consensus price target fell 5.6% to US$65.94, with the analysts clearly linking lower forecast earnings to the performance of the stock price. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Bristol-Myers Squibb analyst has a price target of US$80.00 per share, while the most pessimistic values it at US$6.17. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Bristol-Myers Squibb's rate of growth is expected to accelerate meaningfully, with the forecast 34% revenue growth noticeably faster than its historical growth of 11%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.0% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Bristol-Myers Squibb to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Bristol-Myers Squibb. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
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 Bristol-Myers Squibb analysts - going out to 2024, and you can see them free on our platform here.
Even so, be aware that Bristol-Myers Squibb is showing 5 warning signs in our investment analysis , you should know about...
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