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A week ago, Abbott Laboratories (NYSE:ABT) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$7.3b, some 6.9% above estimates, and statutory earnings per share (EPS) coming in at US$0.30, 147% ahead of expectations. 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.
Taking into account the latest results, the current consensus from Abbott Laboratories' 20 analysts is for revenues of US$32.8b in 2020, which would reflect a reasonable 4.5% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 28% to US$2.22. In the lead-up to this report, the analysts had been modelling revenues of US$31.5b and earnings per share (EPS) of US$1.63 in 2020. So it seems there's been a definite increase in optimism about Abbott Laboratories' future following the latest results, with a sizeable expansion in the earnings per share forecasts in particular.
Despite these upgrades,the analysts have not made any major changes to their price target of US$104, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Abbott Laboratories, with the most bullish analyst valuing it at US$116 and the most bearish at US$80.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. It's pretty clear that there is an expectation that Abbott Laboratories' revenue growth will slow down substantially, with revenues next year expected to grow 4.5%, compared to a historical growth rate of 11% 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 10% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Abbott Laboratories.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Abbott Laboratories' earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower 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 in mind, we wouldn't be too quick to come to a conclusion on Abbott Laboratories. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Abbott Laboratories going out to 2024, and you can see them free on our platform here..
You still need to take note of risks, for example - Abbott Laboratories has 2 warning signs we think you should be aware of.
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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