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Surging Earnings Estimates Signal Upside for Aerojet Rocketdyne (AJRD) Stock

Zacks Equity Research

Aerojet Rocketdyne Holdings (AJRD) 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 rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this aerospace and defense company, 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 Aerojet Rocketdyne, 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 $0.40 per share for the current quarter, which represents a year-over-year change of -11.11%.

Over the last 30 days, two estimates have moved higher for Aerojet Rocketdyne compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 25.4%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $1.63 per share, representing a year-over-year change of -15.54%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Aerojet Rocketdyne. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 9.81%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Aerojet Rocketdyne 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 Aerojet Rocketdyne have attracted decent investments and pushed the stock 7.4% 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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