MercadoLibre (MELI) 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 operator of an online marketplace and payments system in Latin America 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.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for MercadoLibre, as there has been strong agreement among the covering analysts in raising estimates.
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 $4.40 per share for the current quarter represents a change of +81.07% from the number reported a year ago.
Over the last 30 days, the Zacks Consensus Estimate for MercadoLibre has increased 21.88% because two estimates have moved higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $16.90 per share, representing a year-over-year change of +77.33%.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for MercadoLibre. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 8.67%.
Favorable Zacks Rank
The promising estimate revisions have helped MercadoLibre 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.
Investors have been betting on MercadoLibre because of its solid estimate revisions, as evident from the stock's 5.2% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.
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