LivaNova PLC Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
The quarterly results for LivaNova PLC (NASDAQ:LIVN) were released last week, making it a good time to revisit its performance. It looks like a credible result overall - although revenues of US$242m were what the analysts expected, LivaNova surprised by delivering a statutory profit of US$0.77 per share, instead of the previously forecast loss. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for LivaNova
Following the recent earnings report, the consensus from eight analysts covering LivaNova is for revenues of US$933.9m in 2020, implying a definite 13% decline in sales compared to the last 12 months. Earnings are expected to improve, with LivaNova forecast to report a statutory profit of US$0.77 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.07b and earnings per share (EPS) of US$0.59 in 2020. There's been a definite change in sentiment after these results, with the analysts delivering a a definite to next year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is anticipated to reduce its focus on growth to enhance profitability.
The analysts have cut their price target 9.4% to US$68.75 per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings. 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 LivaNova, with the most bullish analyst valuing it at US$88.00 and the most bearish at US$50.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 20% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.2% next year. It's pretty clear that LivaNova's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around LivaNova's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. 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 LivaNova analysts - going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for LivaNova that you should be aware of.
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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