Australian Pharmaceutical Industries Limited Just Recorded A 6.4% EPS Beat: Here’s What Analysts Are Forecasting Next

Last week, you might have seen that Australian Pharmaceutical Industries Limited (ASX:API) released its yearly result to the market. The early response was not positive, with shares down 2.4% to AU$1.40 in the past week. Australian Pharmaceutical Industries reported AU$4.0b in revenue, roughly in line with analyst forecasts, although earnings per share (EPS) of AU$0.11 beat expectations, being 6.4% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.

See our latest analysis for Australian Pharmaceutical Industries

ASX:API Past and Future Earnings, October 26th 2019
ASX:API Past and Future Earnings, October 26th 2019

Following last week’s earnings report, Australian Pharmaceutical Industries’s five analysts are forecasting 2020 revenues to be AU$4.1b, approximately in line with the last 12 months. Earnings per share are expected to decline 14% to AU$0.096 in the same period. In the lead-up to this report, analysts had been modelling revenues of AU$4.1b and earnings per share (EPS) of AU$0.11 in 2020. So there’s definitely been a decline in analyst sentiment after the latest results, noting the real cut to new EPS forecasts.

The consensus price target held steady at AU$1.56, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. Currently, the most bullish analyst values Australian Pharmaceutical Industries at AU$2.11 per share, while the most bearish prices it at AU$1.23. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how analyst forecasts compare, both to the Australian Pharmaceutical Industries’s past performance and to peers in the same market. We would highlight that Australian Pharmaceutical Industries’s revenue growth is expected to slow, with forecast 1.5% increase next year well below the historical 4.2%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.5% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts are also expecting Australian Pharmaceutical Industries to grow slower than the wider market.

The Bottom Line

The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Australian Pharmaceutical Industries. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues 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. We have estimates – from multiple Australian Pharmaceutical Industries analysts – going out to 2022, and you can see them free on our platform here.

You can also view our analysis of Australian Pharmaceutical Industries’s balance sheet, and whether we think Australian Pharmaceutical Industries is carrying too much debt, for free on our platform here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.