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Last week saw the newest quarterly earnings release from Royalty Pharma plc (NASDAQ:RPRX), an important milestone in the company's journey to build a stronger business. It was a negative result overall, with revenues coming in 20% less than what the analysts expected, at US$568m. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Royalty Pharma
After the latest results, the six analysts covering Royalty Pharma are now predicting revenues of US$2.69b in 2024. If met, this would reflect a major 20% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to step up 14% to US$2.02. Before this earnings report, the analysts had been forecasting revenues of US$2.66b and earnings per share (EPS) of US$2.34 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
The consensus price target held steady at US$45.75, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Royalty Pharma at US$60.00 per share, while the most bearish prices it at US$37.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Royalty Pharma's growth to accelerate, with the forecast 28% annualised growth to the end of 2024 ranking favourably alongside historical growth of 1.3% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.3% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Royalty Pharma 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 Royalty Pharma. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster 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.