Legacy Housing Corporation (NASDAQ:LEGH) just released its latest quarterly report and things are not looking great. Results showed a clear earnings miss, with US$42m revenue coming in 5.5% lower than what analysts expected. Earnings per share (EPS) of US$0.25 missed the mark badly, arriving some 23% below what analysts had expected. 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 forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Legacy Housing from three analysts is for revenues of US$183.1m in 2020, which is a decent 14% increase on its sales over the past 12 months. Earnings per share are expected to shoot up 36% to US$1.43. Before this earnings report, analysts had been forecasting revenues of US$184.2m and earnings per share (EPS) of US$1.62 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
Although analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 15% to US$18.33, suggesting the revised estimates are not indicative of a weaker long-term future for the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Legacy Housing analyst has a price target of US$21.00 per share, while the most pessimistic values it at US$16.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Further, we can compare these estimates to past performance, and see how Legacy Housing forecasts compare to the wider market's forecast performance. We can infer from the latest estimates that analysts are expecting a continuation of Legacy Housing's historical trends, as next year's forecast 14% revenue growth is roughly in line with 13% annual revenue growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 5.2% per year. So it's pretty clear that Legacy Housing is forecast to grow substantially faster than its market.
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. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Legacy Housing going out to 2020, and you can see them free on our platform here.
You can also see whether Legacy Housing is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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