Irrespective of whether it is a start-up or a well-known company, earnings growth is the highest priority for any organization. This is because if the company doesn’t make money, it won’t last in the long run. So, what’s earnings growth? Study a company’s revenues over a given period of time, subtract production cost, and you have earnings. By the way, this is also considered the most important variable influencing the share price. But, expectations of earnings play a noteworthy role.
Earnings Estimates & Share Price Movements
Frequently, we have seen a decline in the stock price despite earnings growth and a rally in price following an earnings decline. This is largely the result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Investors, thus, should be on the lookout for stocks that are ready to make a big move. Hence, investors need to buy stocks with historical earnings growth and are seeing a rise in quarterly and annual earnings estimates.
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
Zacks Rank less than or equal to 2 (Only Zacks' 'Buys' and 'Strong Buys' are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.) 5-Year Historical EPS Growth (%) greater than X-Industry (stocks with a strong EPS growth history). % Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal). % Change Q1 Estimates over the last 4 weeks greater than zero (stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks). % Change F1 Estimates over the last 1 week greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 1 week). % Change F1 Estimates over the last 4 weeks greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 4 weeks).
The above criteria narrowed down the universe of around 7,839 stocks to only six. Here are the top three stocks that stand out:
Carlisle Companies ( CSL Quick Quote CSL - Free Report) is a diversified, global portfolio of niche brands and businesses with highly engineered and high-margin products. The company has a Zacks Rank #1 (Strong Buy). CSL’s expected earnings growth rate for the current year is 114.4%. You can see the complete list of today’s Zacks #1 Rank stocks here. PBF Energy ( PBF Quick Quote PBF - Free Report) is a leading refiner of crude. Through five oil refineries and associated infrastructure in the United States, the company provides end products that comprise heating oil, transportation fuels, lubricants and many related products. The company has a Zacks Rank #1. PBF’s expected earnings growth rate for the current year is 827.6%. Hub Group ( HUBG Quick Quote HUBG - Free Report) is a transportation management company that provides multi-modal solutions throughout North America. The company has a Zacks Rank #2 (Buy). HUBG’s expected earnings growth rate for the current year is 103.6%.
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Click here to sign up for a free trial to the Research Wizard today. Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance