Last week, you might have seen that PPD, Inc. (NASDAQ:PPD) released its third-quarter result to the market. The early response was not positive, with shares down 8.3% to US$33.16 in the past week. Sales of US$1.2b surpassed estimates by 8.0%, although statutory earnings per share missed badly, coming in 23% below expectations at US$0.15 per share. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, PPD's 13 analysts are now forecasting revenues of US$4.82b in 2021. This would be a notable 16% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 814% to US$0.85. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.83b and earnings per share (EPS) of US$0.87 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$39.00, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. The most optimistic PPD analyst has a price target of US$42.00 per share, while the most pessimistic values it at US$31.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting PPD's growth to accelerate, with the forecast 16% growth ranking favourably alongside historical growth of 8.0% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect PPD to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for PPD. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$39.00, with the latest estimates not enough to have an impact on their price targets.
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 PPD going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 4 warning signs for PPD (of which 1 is potentially serious!) you should know about.
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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