Last week, you might have seen that Becton, Dickinson and Company (NYSE:BDX) released its yearly result to the market. The early response was not positive, with shares down 4.5% to US$245 in the past week. Earnings per share fell badly short of expectations, coming in at US$3.89, some 36% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$17b. 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 whether the latest forecasts would suggest a change of heart on the company. We thought readers would find it interesting to see analysts’ latest post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Becton Dickinson’s eleven analysts is for revenues of US$18b in 2020, which would reflect a modest 4.1% improvement in sales compared to the last 12 months. Earnings per share are expected to shoot up 192% to US$11.54. In the lead-up to this report, analysts had been modelling revenues of US$18b and earnings per share (EPS) of US$9.48 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the great increase in earnings per share expectations following these results.
The consensus price target was unchanged at US$268, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic Becton Dickinson analyst has a price target of US$290 per share, while the most pessimistic values it at US$248. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
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. It’s pretty clear that analysts expect Becton Dickinson’s revenue growth will slow down substantially, with revenues next year expected to grow 4.1%, compared to a historical growth rate of 14% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 8.1% next year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts also expect the wider market to grow faster than Becton Dickinson.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Becton Dickinson following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Becton Dickinson’s revenues are expected to 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.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Becton Dickinson going out to 2023, and you can see them free on our platform here..
It might also be worth considering whether Becton Dickinson’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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