Shareholders of Mercantile Bank Corporation (NASDAQ:MBWM) will be pleased this week, given that the stock price is up 11% to US$46.45 following its latest third-quarter results. Mercantile Bank reported US$58m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.22 beat expectations, being 4.1% higher than what the analysts expected. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from Mercantile Bank's five analysts is for revenues of US$232.0m in 2025. This reflects a modest 4.4% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to fall 11% to US$4.43 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$228.0m and earnings per share (EPS) of US$4.39 in 2025. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$48.88. 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. The most optimistic Mercantile Bank analyst has a price target of US$50.00 per share, while the most pessimistic values it at US$48.00. 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 3.5% annualised growth rate until the end of 2025 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 6.5% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Mercantile Bank.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. 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$48.88, with the latest estimates not enough to have an impact on their price targets.
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. We have estimates - from multiple Mercantile Bank analysts - going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Mercantile Bank (1 is significant!) 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.
