United Community Banks, Inc. (NASDAQ:UCBI) just released its third-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 5.7% to hit US$177m. United Community Banks also reported a statutory profit of US$0.52, which was an impressive 93% 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from United Community Banks' seven analysts is for revenues of US$654.6m in 2021, which would reflect a substantial 22% increase on its sales over the past 12 months. Statutory per share are forecast to be US$1.88, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$645.6m and earnings per share (EPS) of US$1.73 in 2021. So the consensus seems to have become somewhat more optimistic on United Community Banks' earnings potential following these results.
There's been no major changes to the consensus price target of US$22.69, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic United Community Banks analyst has a price target of US$24.00 per share, while the most pessimistic values it at US$21.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting United Community Banks is an easy business to forecast or the the analysts are all using similar assumptions.
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. The analysts are definitely expecting United Community Banks' growth to accelerate, with the forecast 22% growth ranking favourably alongside historical growth of 11% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 1.5% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that United Community Banks is expected to grow much 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 United Community Banks' earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for United Community Banks going out to 2022, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with United Community Banks , and understanding them should be part of your investment process.
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