For Immediate Release
Chicago, IL – October 30, 2017 - Stocks in this week’s article include Activision Blizzard Inc. ATVI, Callaway Golf Company ELY, Electronic Arts Inc. EA, Rush Enterprises Inc. RUSHA and Zumiez Inc. ZUMZ.
Screen of the Week by Zacks Investment Research:
Looking for an Earnings Beat? Play These 5 Stocks
In the heart of the third-quarter earnings season, investors’ feverish search for earnings beat is understandable. Investors love an earnings beat because it usually always translates into stock price appreciation. In fact, a beat works better than earnings growth in this regard. We’ll tell you why.
What Makes Earnings Beat So Intriguing?
Historically, stocks of companies with solid quarterly earnings (on a nominal basis) fall if they miss or just come in line with market expectations. After all, a 20% earnings rise (though it looks good apparently) doesn’t tell you if earnings growth has been exhibiting a decelerating trend. If that is the case, the company’s fundamentals raise serious doubts.
Also, seasonal fluctuations are crucial in determining a company’s earnings growth. If a company’s Q1 is seasonally weak and its Q4 is strong, it is likely to report a sequential earnings decline in Q1. In such cases, growth rates are misleading when it comes to analyzing the true picture of a company.
On the other hand, Wall Street analysts rack their brains to study companies’ financials and initiatives to forecast earnings. They in fact club their insights and the company’s guidance to derive an earnings estimate.
Thus, beating this key number is almost equivalent to beating the company’s own expectation as well as the market perception. And if the margin of surprise is big, it typically drives the stock higher right after the release.
Now, since it is difficult to foretell if a company will beat or miss in the upcoming earnings season, investors can check its earnings surprise history. An impressive track record generally acts as a catalyst, sending the stock higher. It proves the company’s ability to surpass estimates. And investors generally believe that the company will have the same trick up its sleeve or, in other words, is smart enough to beat on earnings in its next release as well.
For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/280495/looking-for-earnings-beat-play-these-5-stocks
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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Rush Enterprises, Inc. (RUSHA) : Free Stock Analysis Report
Callaway Golf Company (ELY) : Free Stock Analysis Report
Zumiez Inc. (ZUMZ) : Free Stock Analysis Report
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
Electronic Arts Inc. (EA) : Free Stock Analysis Report
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