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Sykes (SYKE) Surges 29.8%: Is This an Indication of Further Gains?

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Sykes Enterprises shares rallied 29.8% in the last trading session to close at $53.45. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 1.1% loss over the past four weeks.

This increased investor optimism can be attributed to the news of its merger with Sitel Group for $54 per share in cash, representing a total transaction value of $2.2 billion.

This outsourcing company is expected to post quarterly earnings of $0.65 per share in its upcoming report, which represents a year-over-year change of -8.5%. Revenues are expected to be $445.39 million, up 6.9% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Sykes, the consensus EPS estimate for the quarter has remained unchanged over the past 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. More importantly, with the stock almost close to the offer price for its acquisition, the possibility of a price appreciation down the road is slim.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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