Meritage Homes Corporation (NYSE:MTH) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.3% to hit US$1.1b. Meritage Homes reported statutory earnings per share (EPS) US$2.84, which was a notable 19% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the six analysts covering Meritage Homes are now predicting revenues of US$5.21b in 2021. If met, this would reflect a huge 23% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to plummet 58% to US$12.89 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.93b and earnings per share (EPS) of US$12.12 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Despite these upgrades,the analysts have not made any major changes to their price target of US$128, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Meritage Homes at US$143 per share, while the most bearish prices it at US$106. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
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. It's clear from the latest estimates that Meritage Homes' rate of growth is expected to accelerate meaningfully, with the forecast 23% revenue growth noticeably faster than its historical growth of 8.6%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.5% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Meritage Homes is expected to grow much faster than its industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Meritage Homes following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at US$128, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Meritage Homes analysts - going out to 2023, and you can see them free on our platform here.
You still need to take note of risks, for example - Meritage Homes has 3 warning signs (and 1 which is potentially serious) we think you should know about.
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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