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Methode Electronics, Inc. (NYSE:MEI) 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$301m, some 8.8% above estimates, and statutory earnings per share (EPS) coming in at US$1.01, 33% ahead of 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Methode Electronics from dual analysts is for revenues of US$1.05b in 2021 which, if met, would be a credible 5.9% increase on its sales over the past 12 months. Statutory earnings per share are forecast to fall 12% to US$3.04 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.01b and earnings per share (EPS) of US$2.78 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
It will come as no surprise to learn that the analysts have increased their price target for Methode Electronics 17% to US$42.00on the back of these upgrades.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Next year brings more of the same, according to the analysts, with revenue forecast to grow 5.9%, in line with its 5.9% annual growth over the past five years. Compare this with the wider industry (in aggregate), which analyst estimates suggest will see revenues grow 7.5% next year. So although Methode Electronics is expected to maintain its revenue growth rate, it's forecast to grow slower 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 Methode Electronics' earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Methode Electronics going out as far as 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 4 warning signs for Methode Electronics (1 is potentially serious!) that you should be aware of.
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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