It's been a good week for Meritor, Inc. (NYSE:MTOR) shareholders, because the company has just released its latest full-year results, and the shares gained 8.4% to US$26.52. It was a credible result overall, with revenues of US$3.0b and statutory earnings per share of US$3.24 both in line with analyst estimates, showing that Meritor is executing in line with expectations. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Meritor's three analysts is for revenues of US$3.35b in 2021, which would reflect a solid 10% increase on its sales over the past 12 months. Statutory earnings per share are expected to plummet 52% to US$1.78 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$3.35b and earnings per share (EPS) of US$1.60 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 7.8% to US$27.80, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Meritor, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$25.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. The analysts are definitely expecting Meritor's growth to accelerate, with the forecast 10% growth ranking favourably alongside historical growth of 4.3% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.3% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Meritor to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Meritor's earnings potential next year. 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. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Meritor going out to 2023, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 2 warning signs for Meritor (of which 1 can't be ignored!) 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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