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Can Callon (CPE) Run Higher on Rising Earnings Estimates?

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Zacks Equity Research
·2 min read
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Callon Petroleum (CPE) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The upward trend in estimate revisions for this independent oil and gas company reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Callon, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $1.16 per share for the current quarter represents a change of -3.33% from the number reported a year ago.

Over the last 30 days, two estimates have moved higher for Callon compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 30.63%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $4.42 per share, representing a year-over-year change of +54.55%.

The revisions trend for the current year also appears quite promising for Callon, with three estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 23.28%.

Favorable Zacks Rank

The promising estimate revisions have helped Callon earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Callon shares have added 84.8% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.


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