Last week, you might have seen that M/I Homes, Inc. (NYSE:MHO) released its yearly result to the market. The early response was not positive, with shares down 3.8% to US$42.72 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$2.5b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 5.1% to hit US$4.48 per share. Following the result, 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from M/I Homes's dual analysts is for revenues of US$2.61b in 2020, which would reflect a credible 4.4% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 4.8% to US$4.80. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.78b and earnings per share (EPS) of US$5.35 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
The average price target climbed 16% to US$47.50 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that M/I Homes's revenue growth is expected to slow, with forecast 4.4% increase next year well below the historical 15%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.4% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than M/I Homes.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on M/I Homes. Long-term earnings power is much more important than next year's profits. We have analyst estimates for M/I Homes going out as far as 2021, and you can see them free on our platform here.
It might also be worth considering whether M/I Homes's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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