Earnings Beat: Taro Pharmaceutical Industries Ltd. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
Taro Pharmaceutical Industries Ltd. (NYSE:TARO) shares fell 5.9% to US$77.45 in the week since its latest third-quarter results. The results were mixed; although revenues of US$148m fell 14% short of analyst estimates, statutory earnings per share (EPS) of US$1.76 beat expectations by 14%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
View our latest analysis for Taro Pharmaceutical Industries
Following the latest results, Taro Pharmaceutical Industries's one analyst are now forecasting revenues of US$708.0m in 2021. This would be a meaningful 9.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to rise 8.7% to US$7.01. Yet prior to the latest earnings, analysts had been forecasting revenues of US$746.2m and earnings per share (EPS) of US$8.00 in 2021. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share forecasts.
The consensus price target fell 15% to US$94.00, with the weaker earnings outlook clearly leading analyst valuation estimates.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. For example, we noticed that Taro Pharmaceutical Industries's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 9.0%, well above its historical decline of 8.5% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue grow 5.3% per year. So it looks like Taro Pharmaceutical Industries is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Taro Pharmaceutical Industries's revenues are expected to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Taro Pharmaceutical Industries's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
You can also see our analysis of Taro Pharmaceutical Industries's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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