Wall Street expects year-over-year profit growth on higher revenues when Prestige Brands (PBH) reports results for the quarter ended September 2021. While this widely known consensus outlook is important In assessing a company’s earnings position, a powerful factor that could affect its stock price in the short term is how actual results compare to those estimates.
The earnings report, which is expected to be released on November 4, 2021, could help the stock rise if those key numbers are better than expectations. On the other hand, if they run out, the stock may go down.
While the sustainability of the immediate price change and future profit expectations will primarily depend on management’s discussion of trading conditions when calling profits, it is worth crippling the likelihood of a positive surprise from the market. BPA.
Zacks consensus estimate
This drug distributor is expected to post quarterly earnings of $ 0.99 per share in its next report, which represents a year-over-year change of + 26.9%.
Revenue is expected to reach $ 261.29 million, up 10.1% from the previous year quarter.
Trend of estimated revisions
The consensus EPS estimate for the quarter has remained unchanged over the past 30 days. This essentially reflects how hedge analysts collectively reassessed their initial estimates during this time period.
Investors should be aware that an overall change may not always reflect the direction of estimate revisions by individual hedge analysts.
Price, consensus and EPS Surprise
Whisper of gains
Revisions to estimates before a company’s results are released provide clues to economic conditions for the period in which the results are released. This idea is at the heart of our exclusive surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction).
Zacks Earnings ESP compares the most accurate estimate to Zacks’ consensus estimate for the quarter; most accurate estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts who revise their estimates just before the results are released have the latest information, which could potentially be more accurate than they and other consensus contributors predicted earlier.
Thus, a positive or negative ESP reading of earnings theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is only significant for positive ESP readings.
A positive ESP on earnings is a good predictor of a pace of earnings, especially when combined with a Zacks # 1 (strong buy), 2 (buy), or 3 (hold) ranking. Our research shows that stocks with this combination produce positive surprise almost 70% of the time, and a strong Zacks rank actually increases the predictive power of ESP for earnings.
Please note that a negative ESP reading of earnings is not indicative of a shortfall. Our research shows that it is difficult to predict a profit beat with any degree of confidence for stocks with negative earnings ESP readings and / or a Zacks ranking of 4 (sell) or 5 (strong sell).
How have the figures evolved for prestige brands?
For premium brands, the most accurate estimate is the same as Zacks ‘consensus estimate, suggesting that there are no recent analysts’ opinions that differ from what has been considered. to derive the consensus estimate. This resulted in an ESP on earnings of 0%.
On the flip side, the action currently carries a Zacks rank of # 3.
Thus, this combination makes it difficult to conclusively predict that Prestige Brands will beat the consensus EPS estimate.
Does the history of earnings surprises contain a clue?
When calculating estimates of a company’s future earnings, analysts often consider how well it has been able to match past consensus estimates. So it’s worth taking a look at the surprise history to gauge its influence on the upcoming issue.
For the last quarter published, Prestige Brands was expected to post a profit of $ 0.86 per share when it actually made a profit of $ 1.14, offering a surprise of + 32.56%.
In the past four quarters, the company has beaten consensus EPS estimates three times.
A beat or failure in profits may not be the only basis for a stock to move higher or lower. Many stocks end up losing ground despite declining earnings due to other factors that disappoint investors. Likewise, unforeseen catalysts help a number of stocks win despite a shortfall.
That said, betting on stocks that are expected to exceed profit expectations increases the chances of success. That’s why it’s worth checking out a company’s ESP results and Zacks rankings ahead of its quarterly release. Be sure to use our ESP Earnings Filter to uncover the best stocks to buy or sell before they get published.
Prestige Brands does not appear to be a compelling candidate in terms of earnings. However, investors should also pay attention to other factors when betting on this stock or staying on the sidelines before its results are released.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.