Bank OZK (NASDAQ:OZK) just released its third-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.5% to hit US$253m. Bank OZK also reported a statutory profit of US$0.84, which was an impressive 46% above what the analysts had forecast. 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.
Following the latest results, Bank OZK's eight analysts are now forecasting revenues of US$990.2m in 2021. This would be a huge 29% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to leap 22% to US$2.59. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$989.3m and earnings per share (EPS) of US$2.52 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of US$28.10, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Bank OZK, with the most bullish analyst valuing it at US$31.00 and the most bearish at US$26.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Bank OZK is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Bank OZK's past performance and to peers in the same industry. It's clear from the latest estimates that Bank OZK's rate of growth is expected to accelerate meaningfully, with the forecast 29% revenue growth noticeably faster than its historical growth of 11%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 1.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Bank OZK is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Bank OZK'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. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Bank OZK. Long-term earnings power is much more important than next year's profits. We have forecasts for Bank OZK going out to 2022, and you can see them free on our platform here.
This article by Simply Wall St is general in nature. 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.
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