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Last week saw the newest quarterly earnings release from Stryker Corporation (NYSE:SYK), an important milestone in the company's journey to build a stronger business. It looks like a pretty bad result, all things considered. Although revenues of US$4.0b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 52% to hit US$0.79 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Stryker from 25 analysts is for revenues of US$17.1b in 2021 which, if met, would be a notable 16% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 101% to US$7.52. In the lead-up to this report, the analysts had been modelling revenues of US$17.1b and earnings per share (EPS) of US$7.35 in 2021. So the consensus seems to have become somewhat more optimistic on Stryker's earnings potential following these results.
The consensus price target rose 6.4% to US$269, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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 Stryker, with the most bullish analyst valuing it at US$285 and the most bearish at US$190 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. The analysts are definitely expecting Stryker's growth to accelerate, with the forecast 22% annualised growth to the end of 2021 ranking favourably alongside historical growth of 7.1% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Stryker to grow faster 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 Stryker's earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Stryker analysts - going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Stryker 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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