Investors in Meritor, Inc. (NYSE:MTOR) had a good week, as its shares rose 8.4% to close at US$26.52 following the release of its annual results. Meritor reported in line with analyst predictions, delivering revenues of US$3.0b and statutory earnings per share of US$3.24, suggesting the business is executing well and in line with its plan. 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. 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 three analysts covering Meritor are now predicting revenues of US$3.35b in 2021. If met, this would reflect a meaningful 10% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to plunge 52% to US$1.78 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.35b and earnings per share (EPS) of US$1.60 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 7.8% to US$27.80. 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 Meritor at US$30.00 per share, while the most bearish prices it at US$25.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Meritor is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Meritor's past performance and to peers in the same industry. The analysts are definitely expecting Meritor's growth to accelerate, with the forecast 10% growth ranking favourably alongside historical growth of 4.3% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.3% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Meritor to grow faster than the wider industry.
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 Meritor following these results. 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. We note an upgrade to the price target, suggesting that the analysts believes 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 estimates - from multiple Meritor analysts - going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Meritor (1 is a bit unpleasant!) that you need to take into consideration.
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