About Estimate Research

Anybody familiar with Zacks.com should have discovered by now that...

Zacks Premium Research

If you are a Zacks Premium subscriber you will be entitled to see the current buy, sell, hold ratings on the company. That includes the Zacks Rank for short term trading and Zacks Recommendations for long term investing. You will also discover the Zacks Industry Rank and Rank in Industry to see how well it compares to its peers. Learn more about Zacks Premium.

Earnings Growth Estimates

Stock prices generally reflect the future earnings prospects for the company. With that being the case, then you will definitely want to pay close attention to this section. Here you will find the growth estimates for a stock compared to the average stock in its industry and S&P 500. Value oriented investors will find this section especially helpful.

Detailed Earnings Estimates

This goes a step beyond the Overview section to provide more detail on the earnings picture for the next two quarters as well as the current and next fiscal year.

Agreement- Estimate Revisions

The Zacks Rank is based on 4 factors. Agreement is the first of those factors and many believe the most important. Agreement looks for the extent to which all brokerage analysts are revising their EPS estimates in the same direction. The more analysts that are revising estimates upward, the higher the Zacks Rank. As you will see with the JNJ example below, there is very little agreement on whether future earnings will be higher or lower. This creates a fairly neutral outlook and need to continue looking for clues in the sections below.

Magnitude- Consensus Estimate Trend

Magnitude is another one of the four factors used to calculate the Zacks Rank. This is a great way to see the trend of earnings estimates over time. Steadily increasing earnings is what you want for your stocks. For larger caps, like JNJ, it is difficult to get massive increases in estimates. Flat to slightly upwards estimates are fine. Any sign of decrease in this section should seriously make you consider selling positions in the stock. Unfortunately that is a chink in JNJ's armor given the Magnitude picture in early June 2006 as estimates have been slowly eroding over the last 90 days.

The Zacks Rank concentrates on the difference between the Current estimates for this year and next versus the estimates from 60 days ago. The greater the percentage difference the greater the magnitude score.

Upside- Most Recent Consensus vs. Zacks Consensus

Few events can move a stock faster than an earnings surprise. One of the best ways to spot a potential earnings surprise before it happens is by checking its "Upside" potential (another of the four factors employed in the Zacks Rank). Upside looks for the difference between the most recent estimates and all estimates. What we call Upside is often dubbed as the "Whisper Number" by the media. Why is this a great indicator? The most recent estimates are almost always the most accurate. So if the most recent estimates are higher than the consensus estimate then it is a great sign that the stock may have a positive earnings surprise. And the reverse is true as well pointing towards an earnings disappointment.

Surprise- Reported Earnings History

Stocks that had positive earnings surprises in the recent past are more likely to have a positive surprise in the future. Just like Upside we want to own stocks that have the greatest potential to have positive surprises given that it usually leads to a rise in share prices. Just as important, companies that miss estimates in the past are more likely to repeat that negative feat in the future. These are generally the stocks to avoid. This element of Surprise is the 4th and final factor used in the Zacks Rank. The results from the most recent quarter are the most predictive of what will be reported in the next quarter.

Quarterly & Annual Estimates by Analyst

As the old saying goes "The devil is in the details". The same is true for researching the earnings picture for a stock. All of the information explained above is of value. However, most of these data points are averages that combine the expectations of many analysts. That is why it's so important to look at the individual estimate history to see the trend over time. There is no better way to see the direction and change in earnings estimates for your stocks than in the 2 tables below. Because this information is so valuable, we can only make it available to Zacks Premium customers.

You may wonder why the names of so many of the brokerage firms and analysts are displayed as "Not Identified". That is because many of the brokerage firms believe that the research they produce is their most valuable asset. Thus, they only allow us to show their estimates if we remove the name of the firm and analyst. Luckily there is little value in knowing which firm produced which estimate as it has little affect on the stock price. What's important is being able to see the flow of estimates which is clearly detailed below.

Conclusion:

If you know that earnings estimate revisions greatly affect stock prices, then you need to come to the Estimates page to fully research your stocks before placing future trades. By making this research step a habit you greatly increase your odds of buying winners early and selling losers before they destroy your portfolio.