Investors in Abiomed, Inc. (NASDAQ:ABMD) had a good week, as its shares rose 8.9% to close at US$184 following the release of its yearly results. Revenues of US$841m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$4.43, missing estimates by 3.9%. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from nine analysts covering Abiomed is for revenues of US$801.8m in 2021, implying a noticeable 4.6% decline in sales compared to the last 12 months. Statutory earnings per share are expected to tumble 23% to US$3.47 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$908.0m and earnings per share (EPS) of US$4.38 in 2021. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a pretty serious reduction to earnings per share numbers as well.
The analysts made no major changes to their price target of US$200, suggesting the downgrades are not expected to have a long-term impact on Abiomed’svaluation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on Abiomed, with the most bullish analyst valuing it at US$230 and the most bearish at US$152 per share. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
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 the forecast 4.6% revenue decline a notable change from historical growth of 25% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Abiomed is expected to lag the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Abiomed. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. 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.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Abiomed analysts – going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example – Abiomed has 1 warning sign we think you should be aware of.
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