For Immediate Release
Chicago, IL – November 13, 2019 - Stocks in this week’s article are Care.com Inc. CRCM, Tenet Healthcare Corp. THC, Fortinet Inc. FTNT, Navient Corp. NAVI and SPS Commerce Inc. SPSC.
Looking for Earnings Beats? Play These 5 Stocks
The third-quarter earnings season is on its last leg, but investors’ fervent search for earnings beat may not have ended. They will still look for an earnings beat in the rest of the to-be-reported quarter. Investors love 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/615559/looking-for-earnings-beat-play-these-5-stocks
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Fortinet, Inc. (FTNT) : Free Stock Analysis Report
SPS Commerce, Inc. (SPSC) : Free Stock Analysis Report
Navient Corporation (NAVI) : Free Stock Analysis Report
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
Care.com, Inc. (CRCM) : Free Stock Analysis Report
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