A week ago, Reata Pharmaceuticals, Inc. (NASDAQ:RETA) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. Revenues were better than expected, with US$8.2m in sales some 11% ahead of forecasts. The company still lost US$1.32 per share, although the losses were marginally smaller than analysts expected. 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've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Reata Pharmaceuticals's six analysts is for revenues of US$41.1m in 2020, which would reflect a substantial 31% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 74% to US$7.48. Before this earnings announcement, analysts had been forecasting revenues of US$41.0m and losses of US$6.54 per share in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the real cut to new EPS forecasts.
Despite expectations of heavier losses next year, analysts have lifted their price target 5.4% to US$231, perhaps implying these losses are not expected to be recurring over the long term. 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 Reata Pharmaceuticals analyst has a price target of US$328 per share, while the most pessimistic values it at US$162. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
In addition, we can look to Reata Pharmaceuticals's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. For example, we noticed that Reata Pharmaceuticals's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 31%, well above its historical decline of 5.2% a year over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 5.5% next year. So it looks like Reata Pharmaceuticals is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that analysts reconfirmed their loss per share estimates for next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Reata Pharmaceuticals's revenues are expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Reata Pharmaceuticals analysts - going out to 2023, and you can see them free on our platform here.
We also provide an overview of the Reata Pharmaceuticals Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.