Novo Nordisk A/S (CPH:NOVO B) Just Beat Earnings: Here's What Analysts Think Will Happen Next
A week ago, Novo Nordisk A/S (CPH:NOVO B) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of ø34b arriving 6.5% ahead of forecasts. Statutory earnings per share (EPS) were ø5.05, 5.9% ahead of estimates. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
View our latest analysis for Novo Nordisk
Taking into account the latest results, the most recent consensus for Novo Nordisk from 22 analysts is for revenues of ø129.5b in 2020 which, if met, would be a credible 2.3% increase on its sales over the past 12 months. Statutory earnings per share are predicted to accumulate 4.3% to ø17.83. Before this earnings report, the analysts had been forecasting revenues of ø129.2b and earnings per share (EPS) of ø18.11 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of ø426, suggesting that the company has met expectations in its recent result. 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. The most optimistic Novo Nordisk analyst has a price target of ø500 per share, while the most pessimistic values it at ø290. 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 Novo Nordisk 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. We would highlight that Novo Nordisk's revenue growth is expected to slow, with forecast 2.3% increase next year well below the historical 3.4%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.9% per year. Factoring in the forecast slowdown in growth, it seems obvious that Novo Nordisk is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Novo Nordisk's revenues are expected to 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 in mind, we wouldn't be too quick to come to a conclusion on Novo Nordisk. Long-term earnings power is much more important than next year's profits. We have forecasts for Novo Nordisk going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Novo Nordisk that you need to take into consideration.
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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