Results: United Arrows Ltd. Confounded Analyst Expectations With A Surprise Profit

It's been a pretty great week for United Arrows Ltd. (TSE:7606) shareholders, with its shares surging 17% to JP¥2,464 in the week since its latest interim results. Although revenues of JP¥68b were in line with analyst expectations, United Arrows surprised on the earnings front, with an unexpected (statutory) profit of JP¥4.87 per share a nice improvement on the losses that the analystsforecast. 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.

View our latest analysis for United Arrows

Taking into account the latest results, the most recent consensus for United Arrows from five analysts is for revenues of JP¥151.9b in 2025. If met, it would imply a credible 7.3% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to shrink 9.1% to JP¥176 in the same period. In the lead-up to this report, the analysts had been modelling revenues of JP¥151.2b and earnings per share (EPS) of JP¥172 in 2025. So the consensus seems to have become somewhat more optimistic on United Arrows' earnings potential following these results.

The consensus price target was unchanged at JP¥2,695, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Arrows analyst has a price target of JP¥3,100 per share, while the most pessimistic values it at JP¥2,480. This is a very narrow spread of estimates, implying either that United Arrows is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that United Arrows is forecast to grow faster in the future than it has in the past, with revenues expected to display 15% annualised growth until the end of 2025. If achieved, this would be a much better result than the 2.3% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 6.9% annually. So it looks like United Arrows is expected to grow faster than its competitors, at least for a while.

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 United Arrows following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at JP¥2,695, 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. At Simply Wall St, we have a full range of analyst estimates for United Arrows going out to 2027, and you can see them free on our platform here..

You should always think about risks though. Case in point, we've spotted 1 warning sign for United Arrows 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.