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Will ServiceNow (NOW) Beat Estimates Again in Its Next Earnings Report?

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Looking for a stock that has been consistently beating earnings estimates and might be well positioned to keep the streak alive in its next quarterly report? ServiceNow (NOW - Free Report) , which belongs to the Zacks Computers - IT Services industry, could be a great candidate to consider.

This maker of software that automates companies' technology operations has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two quarters was 14.80%.

For the last reported quarter, ServiceNow came out with earnings of $2.37 per share versus the Zacks Consensus Estimate of $2.04 per share, representing a surprise of 16.18%. For the previous quarter, the company was expected to post earnings of $2.01 per share and it actually produced earnings of $2.28 per share, delivering a surprise of 13.43%.

Thanks in part to this history, there has been a favorable change in earnings estimates for ServiceNow lately. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the stock is positive, which is a great indicator of an earnings beat, particularly when combined with its solid Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

ServiceNow currently has an Earnings ESP of +3.75%, which suggests that analysts have recently become bullish on the company's earnings prospects. This positive Earnings ESP when combined with the stock's Zacks Rank #1 (Strong Buy) indicates that another beat is possibly around the corner. We expect the company's next earnings report to be released on July 26, 2023.

When the Earnings ESP comes up negative, investors should note that this will reduce the predictive power of the metric. But, a negative value is not indicative of a stock's earnings miss.

Many companies end up beating the consensus EPS estimate, though this is not the only reason why their shares gain. Additionally, some stocks may remain stable even if they end up missing the consensus estimate.

Because of this, it's really important to check a company's Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.


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