Boston Scientific Corporation (NYSE:BSX) shares fell 2.4% to US$40.51 in the week since its latest third-quarter results. Earnings per share fell badly short of expectations, coming in at US$0.09, some 65% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$2.7b. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. With this in mind, we’ve gathered the latest forecasts to see what analysts are expecting for next year.
After the latest results, the 24 analysts covering Boston Scientific are now predicting revenues of US$12b in 2020. If met, this would reflect a solid 16% improvement in sales compared to the last 12 months. Earnings per share are expected to surge 64% to US$1.29. In the lead-up to this report, analysts had been modelling revenues of US$12b and earnings per share (EPS) of US$1.36 in 2020. So it looks like there’s been a small decline in overall sentiment after the recent results – there’s been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$47.38, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Boston Scientific analyst has a price target of US$53.00 per share, while the most pessimistic values it at US$29.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the Boston Scientific’s past performance and to peers in the same market. Analysts are definitely expecting Boston Scientific’s growth to accelerate, with the forecast 16% growth ranking favourably alongside historical growth of 8.0% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 8.1% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Boston Scientific is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at US$47.38, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
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 Boston Scientific analysts – going out to 2023, and you can see them free on our platform here.
You can also see whether Boston Scientific is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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