Avantor, Inc. (NYSE:AVTR) shares fell 5.8% to US$17.52 in the week since its latest yearly results. It looks like the results were pretty good overall. While revenues of US$6.0b were in line with analyst predictions, statutory losses were much smaller than expected, with Avantor losing US$0.84 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Avantor's 16 analysts is for revenues of US$6.31b in 2020, which would reflect an okay 4.4% increase on its sales over the past 12 months. Avantor is also expected to turn profitable, with statutory earnings of US$0.41 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$6.35b and earnings per share (EPS) of US$0.38 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of US$21.00, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Avantor, with the most bullish analyst valuing it at US$27.00 and the most bearish at US$16.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
In addition, we can look to Avantor's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Avantor's revenue growth will slow down substantially, with revenues next year expected to grow 4.4%, compared to a historical growth rate of 46% over the past three years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 7.9% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Avantor to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Avantor's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$21.00, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Avantor. 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 Avantor going out to 2024, and you can see them free on our platform here..
You can also view our analysis of Avantor's balance sheet, and whether we think Avantor is carrying too much debt, for free on our platform here.
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