If you are looking for a stock that has a solid history of beating earnings estimates and is in a good position to maintain the trend in its next quarterly report, you should consider Analog Devices (ADI). This company, which is in the Zacks Semiconductor – Analog and Mixed industry, shows potential for another earnings beat.
This semiconductor maker has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for the past two quarters of 5.37%.
For the most recent quarter, Analog Devices was expected to post earnings of $1.79 per share, but it reported $1.94 per share instead, representing a surprise of 8.38%. For the previous quarter, the consensus estimate was $1.69 per share, while it actually produced $1.73 per share, a surprise of 2.37%.
Price and EPS Surprise
With this earnings history in mind, recent estimates have been moving higher for Analog Devices. In fact, the Zacks
Earnings ESP
(Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its nice Zacks Rank.
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce
a positive surprise nearly 70% of the time
. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates
right before an earnings release
have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
Analog Devices has an Earnings ESP of +2.17% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock’s Zacks Rank #2 (Buy), it shows that another beat is possibly around the corner. The company’s next earnings report is expected to be released on May 18, 2022.
With the Earnings ESP metric, it’s important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.
Many companies end up beating the consensus EPS estimate, though this is not the only reason why their shares gain. Additionally, some stocks may remain stable even if they end up missing the consensus estimate.
Because of this, it’s really important to check a company’s Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our
Earnings ESP Filter
to uncover the best stocks to buy or sell before they’ve reported.
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