Shareholders of Viatris Inc. (NASDAQ:VTRS) will be pleased this week, given that the stock price is up 15% to US$15.72 following its latest quarterly results. Revenues of US$4.4b beat expectations by a respectable 5.6%, although statutory losses per share increased. Viatris lost US$0.86, which was 544% more than what the analysts had included in their models. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, Viatris' 13 analysts are now forecasting revenues of US$17.6b in 2021. This would be a substantial 28% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 93% to US$0.16 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$17.5b and earnings per share (EPS) of US$1.34 in 2021. While the analysts have made no real change to their revenue estimates, we can see that the consensus is now modelling a loss next year - a clear dip in sentiment compared to the previous outlook of a profit.
As a result, there was no major change to the consensus price target of US$19.13, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. 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 Viatris, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$15.00 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 Viatris 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 Viatris' growth to accelerate, with the forecast 38% annualised growth to the end of 2021 ranking favourably alongside historical growth of 2.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 3.8% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Viatris is expected to grow much faster than its industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Viatris dropped from profits to a loss next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Viatris going out to 2025, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Viatris (2 make us uncomfortable!) that you need to be mindful of.
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What are the risks and opportunities for Viatris?
Trading at 75.1% below our estimate of its fair value
Earnings are forecast to grow 16.67% per year
Became profitable this year
Debt is not well covered by operating cash flow
Large one-off items impacting financial results
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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