M/I Homes, Inc. (NYSE:MHO) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. Statutory earnings performance was extremely strong, with revenue of US$848m beating expectations by 27% and earnings per share (EPS) of US$2.51, an impressive 74%ahead of expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the two analysts covering M/I Homes are now predicting revenues of US$3.07b in 2021. If met, this would reflect a credible 6.6% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to reduce 2.8% to US$6.88 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.03b and earnings per share (EPS) of US$6.46 in 2021. So the consensus seems to have become somewhat more optimistic on M/I Homes' earnings potential following these results.
The consensus price target rose 32% to US$51.50, suggesting that higher earnings estimates flow through to the stock's valuation as well.
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. It's pretty clear that there is an expectation that M/I Homes' revenue growth will slow down substantially, with revenues next year expected to grow 6.6%, compared to a historical growth rate of 14% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.4% per year. Factoring in the forecast slowdown in growth, it seems obvious that M/I Homes is also expected to grow slower than other industry participants.
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 M/I Homes 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. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
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 analyst estimates for M/I Homes going out as far as 2022, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for M/I Homes that you need to take into consideration.
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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