Party Time: Brokers Just Made Major Increases To Their Meritage Homes Corporation (NYSE:MTH) Earnings Forecasts

Celebrations may be in order for Meritage Homes Corporation (NYSE:MTH) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.

After the upgrade, the consensus from Meritage Homes' nine analysts is for revenues of US$5.3b in 2023, which would reflect a considerable 16% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to plunge 40% to US$14.94 in the same period. Prior to this update, the analysts had been forecasting revenues of US$4.6b and earnings per share (EPS) of US$12.80 in 2023. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

View our latest analysis for Meritage Homes

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$141, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Meritage Homes, with the most bullish analyst valuing it at US$174 and the most bearish at US$125 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Meritage Homes shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 21% by the end of 2023. This indicates a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Meritage Homes is expected to lag the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Meritage Homes could be a good candidate for more research.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential risk with Meritage Homes, including recent substantial insider selling. You can learn more, and discover the 1 other risk we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.