Thermo Fisher Scientific Inc. (NYSE:TMO) shares fell 3.8% to US$318 in the week since its latest annual results. Thermo Fisher Scientific reported in line with analyst predictions, delivering revenues of US$26b and statutory earnings per share of US$9.17, suggesting the business is executing well and in line with its plan. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Thermo Fisher Scientific's 18 analysts is for revenues of US$26.9b in 2020, which would reflect a modest 5.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to increase 7.2% to US$9.91. In the lead-up to this report, analysts had been modelling revenues of US$26.9b and earnings per share (EPS) of US$9.69 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$349, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. The most optimistic Thermo Fisher Scientific analyst has a price target of US$390 per share, while the most pessimistic values it at US$252. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Thermo Fisher Scientific's performance in recent years. We would highlight that Thermo Fisher Scientific's revenue growth is expected to slow, with forecast 5.2% increase next year well below the historical 10%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.9% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Thermo Fisher Scientific.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Thermo Fisher Scientific's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. 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 Thermo Fisher Scientific. Long-term earnings power is much more important than next year's profits. We have forecasts for Thermo Fisher Scientific going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Thermo Fisher Scientific's balance sheet, and whether we think Thermo Fisher Scientific is carrying too much debt, for free on our platform here.
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