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Earnings Miss: UDG Healthcare plc Missed EPS By 31% And Analysts Are Revising Their Forecasts

Simply Wall St

It's been a good week for UDG Healthcare plc (LON:UDG) shareholders, because the company has just released its latest full-year results, and the shares gained 8.8% to UK£8.26. It looks like a pretty bad result, all things considered. Although revenues of US$1.3b were in line with analyst predictions, earnings fell badly short, missing estimates by 31% to hit US$0.23 per share. 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 forecasts to see whether analysts have changed their earnings models, following these results.

Check out our latest analysis for UDG Healthcare

LSE:UDG Past and Future Earnings, November 30th 2019

Taking into account the latest results, the current consensus from UDG Healthcare's ten analysts is for revenues of US$1.40b in 2020, which would reflect a credible 7.6% increase on its sales over the past 12 months. Earnings per share are expected to jump 84% to US$0.42. In the lead-up to this report, analysts had been modelling revenues of US$1.37b and earnings per share (EPS) of US$0.40 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$10.96, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. There are some variant perceptions on UDG Healthcare, with the most bullish analyst valuing it at US$15.03 and the most bearish at US$8.00 per share. 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.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the UDG Healthcare's past performance and to peers in the same market. We would highlight that UDG Healthcare's revenue growth is expected to slow, with forecast 7.6% increase next year well below the historical 13%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.7% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting UDG Healthcare to grow at about the same rate as the wider market.

The Bottom Line

The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around UDG Healthcare's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. 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. At Simply Wall St, we have a full range of analyst estimates for UDG Healthcare going out to 2023, and you can see them free on our platform here..

It might also be worth considering whether UDG Healthcare's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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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