Laboratory Corporation of America Holdings (NYSE:LH) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. Laboratory Corporation of America Holdings delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$2.8b, some 14% above indicated. Statutory EPS were US$2.37, an impressive 216% ahead of forecasts. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Laboratory Corporation of America Holdings' 17 analysts are now forecasting revenues of US$12.7b in 2020. This would be a meaningful 10% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 100% to US$7.44. In the lead-up to this report, the analysts had been modelling revenues of US$11.8b and earnings per share (EPS) of US$2.38 in 2020. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a very substantial lift in earnings per share in particular.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$223, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Laboratory Corporation of America Holdings, with the most bullish analyst valuing it at US$249 and the most bearish at US$183 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Laboratory Corporation of America Holdings is an easy business to forecast or the the analysts are all using similar assumptions.
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. The analysts are definitely expecting Laboratory Corporation of America Holdings' growth to accelerate, with the forecast 10% growth ranking favourably alongside historical growth of 8.1% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.5% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Laboratory Corporation of America Holdings is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Laboratory Corporation of America Holdings' earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at US$223, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Laboratory Corporation of America Holdings analysts - going out to 2024, and you can see them free on our platform here.
Plus, you should also learn about the 4 warning signs we've spotted with Laboratory Corporation of America Holdings .
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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