Lonza Group AG Just Missed EPS By 11%: Here's What Analysts Think Will Happen Next

The analysts might have been a bit too bullish on Lonza Group AG (VTX:LONN), given that the company fell short of expectations when it released its half-year results last week. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CHF3.1b, statutory earnings missed forecasts by 11%, coming in at just CHF5.54 per share. Following the result, the 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Lonza Group

Taking into account the latest results, the most recent consensus for Lonza Group from 19 analysts is for revenues of CHF6.50b in 2023. If met, it would imply an okay 2.9% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to sink 10% to CHF13.68 in the same period. Before this earnings report, the analysts had been forecasting revenues of CHF6.61b and earnings per share (EPS) of CHF14.71 in 2023. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at CHF671, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Lonza Group, with the most bullish analyst valuing it at CHF900 and the most bearish at CHF570 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Lonza Group's past performance and to peers in the same industry. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 5.9% growth on an annualised basis. That is in line with its 4.9% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 11% per year. So it's pretty clear that Lonza Group is expected to grow slower than similar companies in the same industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Lonza Group. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at CHF671, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Lonza Group going out to 2025, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Lonza Group you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.