Mercantile Bank Corporation Just Beat EPS By 17%: Here's What Analysts Think Will Happen Next

Mercantile Bank Corporation (NASDAQ:MBWM) just released its latest quarterly results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 5.1% to hit US$58m. Mercantile Bank reported statutory earnings per share (EPS) US$1.34, which was a notable 17% above what the analysts had forecast. Following the result, the 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Mercantile Bank

After the latest results, the four analysts covering Mercantile Bank are now predicting revenues of US$226.3m in 2024. If met, this would reflect a reasonable 2.8% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to reduce 7.1% to US$4.77 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$225.0m and earnings per share (EPS) of US$4.61 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$41.67, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Mercantile Bank at US$47.00 per share, while the most bearish prices it at US$37.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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. We would highlight that Mercantile Bank's revenue growth is expected to slow, with the forecast 3.7% annualised growth rate until the end of 2024 being well below the historical 9.7% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that Mercantile Bank is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Mercantile Bank following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$41.67, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Mercantile Bank. Long-term earnings power is much more important than next year's profits. We have forecasts for Mercantile Bank going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Mercantile Bank that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.