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Can Williams-Sonoma (WSM) Run Higher on Rising Earnings Estimates?

Zacks Equity Research

Investors might want to bet on Williams-Sonoma (WSM), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this seller of cookware and home furnishings, 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.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Williams-Sonoma, 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 company is expected to earn $0.14 per share for the current quarter, which represents a year-over-year change of -82.72%.

Over the last 30 days, two estimates have moved higher for Williams-Sonoma compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 29.77%.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $3.38 per share represents a change of -30.17% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Williams-Sonoma. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 8.82%.

Favorable Zacks Rank

The promising estimate revisions have helped Williams-Sonoma 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

Investors have been betting on Williams-Sonoma because of its solid estimate revisions, as evident from the stock's 25.3% 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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