Incyte Corporation (NASDAQ:INCY) shareholders are probably feeling a little disappointed, since its shares fell 4.0% to US$83.15 in the week after its latest quarterly results. Revenues came in at US$621m, in line with estimates, while Incyte reported a statutory loss of US$0.07 per share, well short of prior analyst forecasts for a profit. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Incyte from 18 analysts is for revenues of US$2.86b in 2021 which, if met, would be a solid 16% increase on its sales over the past 12 months. Earnings are expected to improve, with Incyte forecast to report a statutory profit of US$2.76 per share. In the lead-up to this report, the analysts had been modelling revenues of US$2.85b and earnings per share (EPS) of US$2.82 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.
The consensus price target held steady at US$104, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on Incyte, with the most bullish analyst valuing it at US$133 and the most bearish at US$85.00 per share. 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.
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 Incyte's revenue growth is expected to slow, with forecast 16% increase next year well below the historical 23%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 20% next year. Factoring in the forecast slowdown in growth, it seems obvious that Incyte is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will 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 Incyte. Long-term earnings power is much more important than next year's profits. We have forecasts for Incyte going out to 2024, and you can see them free on our platform here.
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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