Karuna Therapeutics, Inc. (NASDAQ:KRTX) Reported Earnings Last Week And Analysts Are Already Upgrading Their Estimates

Karuna Therapeutics, Inc. (NASDAQ:KRTX) just released its latest quarterly report and things are not looking great. Earnings missed the mark badly, with revenues of US$81k falling 88% short of expectations. Losses correspondingly increased, with a US$2.38 per-share statutory loss some 13% larger than what the analysts expected. 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.

Check out the opportunities and risks within the US Biotechs industry.

Following the recent earnings report, the consensus from 15 analysts covering Karuna Therapeutics is for revenues of US$29.1m in 2023, implying a concerning 31% decline in sales compared to the last 12 months. Losses are forecast to balloon 42% to US$9.40 per share. Before this earnings announcement, the analysts had been modelling revenues of US$26.8m and losses of US$9.05 per share in 2023. Overall it looks as though the analysts were a bit mixed on the latest consensus updates. Although there was a nice uplift to revenue, the consensus also made a moderate increase in its losses per share forecasts.

The consensus price target stayed unchanged at US$285, seeming to suggest that higher forecast losses are not expected to have a long term impact on the 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. There are some variant perceptions on Karuna Therapeutics, with the most bullish analyst valuing it at US$332 and the most bearish at US$175 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 26% by the end of 2023. This indicates a significant reduction from annual growth of 99% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 15% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Karuna Therapeutics is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Karuna Therapeutics going out to 2024, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Karuna Therapeutics you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.