A week ago, Taylor Morrison Home Corporation (NYSE:TMHC) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. Taylor Morrison Home delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$1.7b, some 14% above indicated. Statutory EPS were US$0.87, an impressive 42% ahead of forecasts. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Taylor Morrison Home after the latest results.
After the latest results, the five analysts covering Taylor Morrison Home are now predicting revenues of US$7.43b in 2021. If met, this would reflect a substantial 23% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 131% to US$3.86. Before this earnings report, the analysts had been forecasting revenues of US$6.97b and earnings per share (EPS) of US$3.64 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Despite these upgrades,the analysts have not made any major changes to their price target of US$32.38, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Taylor Morrison Home at US$37.00 per share, while the most bearish prices it at US$27.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. It's clear from the latest estimates that Taylor Morrison Home's rate of growth is expected to accelerate meaningfully, with the forecast 23% revenue growth noticeably faster than its historical growth of 13%p.a. 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 9.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Taylor Morrison Home 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 Taylor Morrison Home following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Taylor Morrison Home going out to 2021, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Taylor Morrison Home (of which 1 is a bit concerning!) you should know about.
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