On Tuesday, Piper Sandler modified its outlook on Elanco Animal Health (NYSE:NYSE:ELAN), raising the price target to $18.00 from the previous $12.00, while keeping a Neutral rating on the stock. The adjustment follows Elanco's recent earnings report, which prompted the firm to update its financial model for the company.
The new price target is based on a revised enterprise value-to-sales (EV/Sales) multiple of 3.2x, up from 2.5x, applied to the firm's 2025 revenue estimate. This valuation also accounts for the company's net debt of $5,695 million and a share count of 493 million.
Piper Sandler's updated price target represents about a 10% discount to Elanco's historical average trading multiple. The discount reflects the belief that a fair trading multiple should be somewhat lower than historical figures, considering the company's IPO in 2018 and the high comparative valuations from that time.
In terms of financial projections, Piper Sandler has revised its 2024 estimated revenue and adjusted earnings per share (EPS) for Elanco to $4,470 million and $0.88, respectively, a slight decrease from the previous estimates of $4,487 million and $0.90. These figures are compared to a consensus of $4,500 million in revenue and $0.93 in adjusted EPS.
Looking ahead to 2025, the firm has adjusted its estimates to $4,633 million in revenue and $0.96 in adjusted EPS, which is a slight change from the earlier projections of $4,584 million and $0.97. The consensus for 2025 stands at $4,684 million in revenue and $1.07 in adjusted EPS.
Additionally, Piper Sandler has initiated its 2026 revenue and adjusted EPS estimates for Elanco at $4,957 million and $1.09, respectively. This is in contrast to a consensus estimate of $4,880 million in revenue and $1.17 in adjusted EPS. The updated price target and financial estimates reflect the firm's latest analysis and a shift in the timeframe of the price target to a 2025 basis.
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