The Lonza Group Ltd (VTX:LONN) Analysts Have Been Trimming Their Sales Forecasts

Market forces rained on the parade of Lonza Group Ltd (VTX:LONN) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 4.7% to CHF596 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After this downgrade, Lonza Group's ten analysts are now forecasting revenues of CHF5.9b in 2021. This would be a substantial 31% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 23% to CHF12.12. Before this latest update, the analysts had been forecasting revenues of CHF6.5b and earnings per share (EPS) of CHF13.00 in 2021. It's pretty clear that analyst sentiment has fallen after the recent consensus updates, leading to lower revenue forecasts and a small dip in earnings per share estimates.

View our latest analysis for Lonza Group

Despite the cuts to forecast earnings, there was no real change to the CHF645 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Lonza Group, with the most bullish analyst valuing it at CHF774 and the most bearish at CHF410 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Lonza Group shareholders.

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. The analysts are definitely expecting Lonza Group's growth to accelerate, with the forecast 31% growth ranking favourably alongside historical growth of 9.0% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Lonza Group to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Lonza Group going forwards.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on Lonza Group's mountain of debt, which could lead to some belt tightening for shareholders. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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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. 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.
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