Results: Lannett Company, Inc. Delivered A Surprise Loss And Now Analysts Have New Forecasts
It's been a mediocre week for Lannett Company, Inc. (NYSE:LCI) shareholders, with the stock dropping 19% to US$7.58 in the week since its latest quarterly results. Revenues of US$144m beat expectations by 7.0%. Unfortunately statutory earnings per share (EPS) fell well short of the mark, turning in a loss of US$0.43 compared to previous analyst expectations of a profit. 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.
Check out our latest analysis for Lannett Company
Taking into account the latest results, the most recent consensus for Lannett Company from five analysts is for revenues of US$571.5m in 2021 which, if met, would be a satisfactory 5.5% increase on its sales over the past 12 months. Lannett Company is also expected to turn profitable, with statutory earnings of US$1.25 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$584.7m and earnings per share (EPS) of US$0.67 in 2021. While revenue forecasts have been revised downwards, the analysts look to have become more optimistic on the company's cost base, given the great increase in to the earnings per share numbers.
There's been no real change to the average price target of US$10.25, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Lannett Company at US$11.00 per share, while the most bearish prices it at US$10.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Lannett Company is an easy business to forecast or that the the analysts are all using similar assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Lannett Company's revenue growth will slow down substantially, with revenues next year expected to grow 5.5%, compared to a historical growth rate of 7.3% over the past five years. Compare this to the 283 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 6.1% per year. Factoring in the forecast slowdown in growth, it looks like Lannett Company is forecast to grow at about the same rate as 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 Lannett Company's earnings potential next year. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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 Lannett Company going out to 2024, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for Lannett Company (of which 1 is a bit concerning!) you should know about.
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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