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Cochlear Limited Just Beat EPS By 142%: Here's What Analysts Think Will Happen Next

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Simply Wall St
·4 min read
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Cochlear Limited (ASX:COH) just released its interim report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 6.8% to hit AU$743m. Cochlear also reported a statutory profit of AU$3.59, which was an impressive 142% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Cochlear after the latest results.

See our latest analysis for Cochlear

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Cochlear's 14 analysts is for revenues of AU$1.51b in 2021, which would reflect a meaningful 15% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Cochlear forecast to report a statutory profit of AU$4.61 per share. Before this earnings report, the analysts had been forecasting revenues of AU$1.42b and earnings per share (EPS) of AU$3.08 in 2021. So it seems there's been a definite increase in optimism about Cochlear's future following the latest results, with a sizeable expansion in the earnings per share forecasts in particular.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of AU$203, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Cochlear, with the most bullish analyst valuing it at AU$241 and the most bearish at AU$138 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 Cochlear's growth to accelerate, with the forecast 15% growth ranking favourably alongside historical growth of 4.9% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% next year. Cochlear is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Cochlear following these results. They also upgraded their revenue forecasts, although the latest estimates suggest that Cochlear will grow in line with the overall 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.

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 forecasts for Cochlear going out to 2025, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for Cochlear that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.