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Earnings Estimates Moving Higher for SM Energy (SM): Time to Buy?
SM Energy (SM - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
Analysts' growing optimism on the earnings prospects of this independent oil and gas company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for SM Energy, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $0.11 per share for the current quarter represents a change of +320% from the number reported a year ago.
Over the last 30 days, one estimate has moved higher for SM Energy compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 6.25%.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $0.20 per share represents a change of +186.96% from the year-ago number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for SM Energy. Over the past month, one estimate has moved higher compared to no negative revisions, helping the consensus estimate increase 20.79%.
Favorable Zacks Rank
The promising estimate revisions have helped SM Energy earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
SM Energy shares have added 11.2% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.