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Can Ironwood (IRWD) Run Higher on Rising Earnings Estimates?

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Zacks Equity Research
·2 min read
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Ironwood Pharmaceuticals (IRWD) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The upward trend in estimate revisions for this drugmaker 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 Ironwood, 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

For the current quarter, the company is expected to earn $0.27 per share, which is a change of -10% from the year-ago reported number.

Over the last 30 days, the Zacks Consensus Estimate for Ironwood has increased 72.34% because three estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $0.68 per share for the full year, which represents a change of +78.95% from the prior-year number.

The revisions trend for the current year also appears quite promising for Ironwood, with four 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 30.62%.

Favorable Zacks Rank

The promising estimate revisions have helped Ironwood 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

While strong estimate revisions for Ironwood have attracted decent investments and pushed the stock 22.4% 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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Zacks Investment Research