LivaNova PLC (NASDAQ:LIVN) shareholders are probably feeling a little disappointed, since its shares fell 5.8% to US$50.34 in the week after its latest quarterly results. The results don't look great, especially considering that statutory losses grew 153% toUS$0.30 per share. Revenues of US$240m did beat expectations by 9.9%, but it looks like a bit of a cold comfort. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, LivaNova's eight analysts are now forecasting revenues of US$1.05b in 2021. This would be an okay 6.6% improvement in sales compared to the last 12 months. LivaNova is also expected to turn profitable, with statutory earnings of US$0.84 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.04b and earnings per share (EPS) of US$1.03 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$66.25, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values LivaNova at US$86.00 per share, while the most bearish prices it at US$56.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await LivaNova shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that LivaNova's revenue growth will slow down substantially, with revenues next year expected to grow 6.6%, compared to a historical growth rate of 13% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 9.5% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than LivaNova.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for LivaNova. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that LivaNova's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$66.25, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on LivaNova. Long-term earnings power is much more important than next year's profits. We have forecasts for LivaNova going out to 2024, 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 LivaNova 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.
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