The HUTCHMED (China) Limited (LON:HCM) Analysts Have Been Trimming Their Sales Forecasts

One thing we could say about the analysts on HUTCHMED (China) Limited (LON:HCM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from HUTCHMED (China)'s 18 analysts is for revenues of US$662m in 2024, which would reflect a sizeable 21% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.17 per share in 2024. However, before this estimates update, the consensus had been expecting revenues of US$763m and US$0.28 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also reducing the estimated losses the business will incur.

See our latest analysis for HUTCHMED (China)

There was no major change to the US$5.40 average analyst price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on HUTCHMED (China), with the most bullish analyst valuing it at US$7.94 and the most bearish at US$2.77 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 21% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 32% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.7% annually for the foreseeable future. It's pretty clear that HUTCHMED (China)'s revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that HUTCHMED (China)'s revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on HUTCHMED (China) after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple HUTCHMED (China) analysts - going out to 2026, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.