Things Look Grim For WuXi Biologics (Cayman) Inc. (HKG:2269) After Today's Downgrade

One thing we could say about the analysts on WuXi Biologics (Cayman) Inc. (HKG:2269) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the 31 analysts covering WuXi Biologics (Cayman) are now predicting revenues of CN¥17b in 2023. If met, this would reflect a credible 2.1% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to accumulate 8.1% to CN¥1.05. Previously, the analysts had been modelling revenues of CN¥20b and earnings per share (EPS) of CN¥1.20 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

Check out our latest analysis for WuXi Biologics (Cayman)

The consensus price target fell 25% to CN¥52.31, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. Currently, the most bullish analyst values WuXi Biologics (Cayman) at CN¥108 per share, while the most bearish prices it at CN¥20.04. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that WuXi Biologics (Cayman)'s revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 4.2% growth on an annualised basis. This is compared to a historical growth rate of 41% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 24% per year. Factoring in the forecast slowdown in growth, it seems obvious that WuXi Biologics (Cayman) is also expected to grow slower than other industry participants.

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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that WuXi Biologics (Cayman)'s revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of WuXi Biologics (Cayman).

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for WuXi Biologics (Cayman) going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.