American Homes 4 Rent (NYSE:AMH) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$311m, some 3.9% above estimates, and statutory earnings per share (EPS) coming in at US$0.07, 97% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on American Homes 4 Rent after the latest results.
Taking into account the latest results, the current consensus from American Homes 4 Rent's 14 analysts is for revenues of US$1.24b in 2021, which would reflect a modest 7.6% increase on its sales over the past 12 months. Statutory earnings per share are forecast to drop 16% to US$0.23 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.24b and earnings per share (EPS) of US$0.25 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.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$31.87, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. Currently, the most bullish analyst values American Homes 4 Rent at US$38.00 per share, while the most bearish prices it at US$27.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the American Homes 4 Rent's past performance and to peers in the same industry. It's pretty clear that there is an expectation that American Homes 4 Rent's revenue growth will slow down substantially, with revenues next year expected to grow 7.6%, compared to a historical growth rate of 12% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.0% next year. Even after the forecast slowdown in growth, it seems obvious that American Homes 4 Rent is also expected to grow faster than the wider industry.
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. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$31.87, with the latest estimates not enough to have an impact on their price targets.
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. At Simply Wall St, we have a full range of analyst estimates for American Homes 4 Rent going out to 2023, and you can see them free on our platform here..
Plus, you should also learn about the 3 warning signs we've spotted with American Homes 4 Rent (including 1 which is concerning) .
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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