It's been a good week for First Merchants Corporation (NASDAQ:FRME) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.0% to US$25.68. It looks like a credible result overall - although revenues of US$119m were what the analysts expected, First Merchants surprised by delivering a (statutory) profit of US$0.62 per share, an impressive 31% above what was 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. 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 five analysts covering First Merchants are now predicting revenues of US$493.1m in 2020. If met, this would reflect a decent 14% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to drop 13% to US$2.45 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$493.8m and earnings per share (EPS) of US$2.22 in 2020. Although the revenue estimates have not really changed, we can see there's been a solid gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target was unchanged at US$31.30, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 First Merchants, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$28.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await First Merchants shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 14%, in line with its 13% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 2.0% per year. So it's pretty clear that First Merchants is forecast to grow substantially faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around First Merchants' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for First Merchants going out to 2022, and you can see them free on our platform here.
Even so, be aware that First Merchants is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
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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