Perrigo Company plc Just Recorded A 37% EPS Beat: Here's What Analysts Are Forecasting Next
Perrigo Company plc (NYSE:PRGO) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks like a credible result overall - although revenues of US$1.3b were what the analysts expected, Perrigo surprised by delivering a (statutory) profit of US$0.77 per share, an impressive 37% above what was forecast. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
View our latest analysis for Perrigo
Taking into account the latest results, the most recent consensus for Perrigo from twelve analysts is for revenues of US$5.17b in 2020 which, if met, would be a satisfactory 3.2% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 119% to US$3.04. Before this earnings report, the analysts had been forecasting revenues of US$5.13b and earnings per share (EPS) of US$2.20 in 2020. Although the revenue estimates have not really changed, we can see there's been a very substantial lift in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target was unchanged at US$55.58, 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. Currently, the most bullish analyst values Perrigo at US$70.00 per share, while the most bearish prices it at US$40.00. 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 Perrigo shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Perrigo is forecast to grow faster in the future than it has in the past, with revenues expected to grow 3.2%. If achieved, this would be a much better result than the 0.2% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 6.0% per year. So although Perrigo's revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Perrigo's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Perrigo. Long-term earnings power is much more important than next year's profits. We have forecasts for Perrigo going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Perrigo (1 is concerning!) that you should be aware of.
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