Back to top

Anatomy of Success

Stocks receiving upward earnings estimate revisions going into an earnings report can give an investor an extra shot of confidence to hold onto a stock, or even get in with a brand new position, as the probability of a positive earnings surprise increases.

This is especially true when the most accurate estimate is above the consensus estimate just days before a company reports.

An analyst must feel pretty confident about the numbers a company will report to stick his or her neck out like that. Moreover, when other analysts follow suit, it can be even more telling.

Stoneridge (SRI - Snapshot Report)

That's exactly what happened with Stoneridge. On May 3rd, 2013, their earnings estimates were being ratcheted up by analysts, sending it from a Zacks Rank #3 (Hold) to a Zacks Rank #2 (Buy) within days before their report.

On May 9th, their foreshadowing was right as SRI posted a 50.00% positive ESP surprise. Shortly thereafter, their earnings estimates increased even more in quick succession, as their Zacks Rank was upgraded once again to a Zacks Rank #1 (Strong Buy).

Prices, trying to keep up, surged as a result, gaining 52.95% in 7 short weeks. All while the S&P produced a lackluster 0.76% during that same time frame.

The Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys) have proven to outperform the market over the next 1-3 months time and time again. And the outperformance shown above is a great illustration of exactly what that means and how quickly Zacks Rank market-beating gains can add up.

Getting into a stock in front of an earnings report can be scary sometimes. But when you see a stock receiving upward earnings estimate revisions leading into a report, and accompanied by a positive Zacks Rank, the odds of success tilt more and more in your favor.

For those who still prefer to wait until after a company reports earnings to get into a new position, not to worry. Following a positive surprise, the best reports will give analysts plenty of reason to increase estimates, especially if a company raises their outlook.

And oftentimes, the move that follows a positive surprise and raised guidance (which means upward revisions and a top Zacks Rank) can be even more profitable than the surprise move itself.

Click here to find more Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) stocks

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%