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Hutchison China MediTech Limited Just Released Its Third-Quarter Earnings: Here's What Analysts Think

There's been a notable change in appetite for Hutchison China MediTech Limited (LON:HCM) shares in the week since its third-quarter report, with the stock down 18% to UK£3.64. Hutchison China MediTech beat revenue forecasts by a solid 13%, hitting US$49m. Statutory losses also increased, with a per-share loss of US$0.11, slightly larger than what analysts were expecting. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Hutchison China MediTech

AIM:HCM Past and Future Earnings, January 24th 2020
AIM:HCM Past and Future Earnings, January 24th 2020

Taking into account the latest results, the latest consensus from Hutchison China MediTech's nine analysts is for revenues of US$214.3m in 2020, which would reflect a modest 4.7% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 70% (on a statutory basis) to US$0.24. Before this latest report, the consensus had been expecting revenues of US$212.4m and US$0.24 per share in losses. Although the revenue estimates have not really changed, we can see there's been a earnings per share expectations, suggesting that analysts have become more bullish after the latest result.

As a result there was no major change to the consensus price target of US$6.32, implying that the business is trading roughly in line with analyst expectations despite ongoing 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. The most optimistic Hutchison China MediTech analyst has a price target of US$7.74 per share, while the most pessimistic values it at US$4.69. This shows there is still quite 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.

It can also be useful to step back and take a broader view of how analyst forecasts compare to Hutchison China MediTech's performance in recent years. It's pretty clear that analysts expect Hutchison China MediTech's revenue growth will slow down substantially, with revenues next year expected to grow 4.7%, compared to a historical growth rate of 13% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.1% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Hutchison China MediTech.

The Bottom Line

The most important thing to note from these estimates is that the consensus increased its forecast losses next year, suggesting all may not be well at Hutchison China MediTech. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Hutchison China MediTech's revenues are expected to perform worse than the wider market. The consensus price target held steady at US$6.32, with the latest estimates not enough to have an impact on analysts' estimated valuations.

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 Hutchison China MediTech analysts - going out to 2024, and you can see them free on our platform here.

You can also see our analysis of Hutchison China MediTech's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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