Arko Corp. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

As you might know, Arko Corp. (NASDAQ:ARKO) just kicked off its latest second-quarter results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 7.4% to hit US$2.5b. Arko also reported a statutory profit of US$0.24, which was an impressive 25% above what the analysts had forecast. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Arko

Following the latest results, Arko's six analysts are now forecasting revenues of US$9.14b in 2022. This would be a credible 7.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to fall 14% to US$0.55 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$9.09b and earnings per share (EPS) of US$0.49 in 2022. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the decent improvement in earnings per share expectations following these results.

The consensus price target was unchanged at US$12.46, 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. There are some variant perceptions on Arko, with the most bullish analyst valuing it at US$15.00 and the most bearish at US$8.50 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 Arko shareholders.

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 pretty clear that there is an expectation that Arko's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 15% growth on an annualised basis. This is compared to a historical growth rate of 23% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.6% per year. So it's pretty clear that, while Arko's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Arko's earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$12.46, 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 Arko going out to 2024, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 1 warning sign for Arko 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.