Key Highlights

  • KARO shares were trading down 2.93% at $60.28, against a prior close of $62.10.
  • Second quarter EPS of ZAR9.28 missed estimates of ZAR9.40 to ZAR9.56.
  • Revenue of ZAR1.64 billion beat a consensus of about ZAR1.6 billion.
  • Cartrack subscription Revenue grew 23% in constant currency.
  • Record operating profit of ZAR422 million rose 19%.

An EPS Miss Tempers a Strong Top Line

Karooooo (NASDAQ:KARO) shares were trading down 2.93% at $60.28 on Tuesday, against a prior close of $62.10, after the company reported fiscal second quarter results following Monday's close. Revenue rose 22% to ZAR1.64 billion and beat a consensus of about ZAR1.6 billion, but EPS of ZAR9.28 came in below estimates of ZAR9.40 to ZAR9.56. Free Cash Flow was weaker on higher Capital spending, including a buffer against rising memory prices.

The shares closed up 2.85% at $62.10 on Monday, then slid sharply in after-hours trading, and have since recovered part of that loss. Investors appear focused on the EPS shortfall and weaker cash flow despite the top-line strength.

The Singapore-headquartered company runs the Cartrack fleet management and vehicle telematics platform, serving about 2.9 million subscribers, and a quick-commerce delivery unit called Karooooo Logistics.

Subscription Growth Accelerates, but the Rand Obscures the Gains

Cartrack subscription revenue rose 20% to ZAR1,415 million, accelerating from 19% in the prior quarter, and grew 23% in constant currency. Annual Recurring Revenue rose 19% to ZAR5,708 million, or 30% in U.S. dollars to USD354 million, and the company added a record 94,516 net subscribers for a second quarter.

Operating profit reached a record ZAR422 million, up 19%, with a Cartrack Operating Margin of 28%, a subscription gross margin of 71% and an adjusted EBITDA margin of 46%. Karooooo Logistics grew revenue 36% to ZAR189 million, although its operating margin was only 6%.

Valuation, Analyst Targets and a Maintained Outlook

Karooooo has a market Capitalization of $1.86 billion and a trailing price-to-earnings ratio of 29.90, with trailing EPS of $1.98 and a Dividend Yield of 2.49%. The shares trade about 12% below the 52-week high of $68.80 and well above the low of $41.25.

Four analysts have an average price target of $67.50, within a range of $55 to $75. Management reiterated its fiscal 2027 outlook, including subscription revenue growth of 18% to 24%, and the Balance Sheet is unleveraged after a July dividend payment.

Capital Spending and Cash Conversion Are the Next Questions for Cartrack

Karooooo showed an accelerating subscription engine and record profit, while the EPS miss and weaker free cash flow explain the cautious reaction. A stronger rand continues to reduce reported growth, and the logistics unit adds revenue at a thinner margin. Investors may watch whether capital spending eases, whether sales Investment keeps converting into subscribers, and what management says at its scheduled Tuesday webinar.