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Earnings Estimates Moving Higher for Cabot (COG): Time to Buy?

Zacks Equity Research

Cabot Oil (COG) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

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. This insight is at the core of our stock rating tool -- the Zacks Rank.

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 Cabot, 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 company is expected to earn $0.68 per share for the current quarter, which represents a year-over-year change of +142.86%.

The Zacks Consensus Estimate for Cabot has increased 8.42% over the last 30 days, as three estimates have gone higher while one has gone lower.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $2.00 per share represents a change of +68.07% from the year-ago number.

The revisions trend for the current year also appears quite promising for Cabot, with four estimates moving higher over the past month compared to one negative revision. The consensus estimate has also received a boost over this time frame, increasing 8.98%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Cabot currently carries a Zacks Rank #1 (Strong 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

While strong estimate revisions for Cabot have attracted decent investments and pushed the stock 7.7% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.


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