Parsley Energy (PE - 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. This insight is at the core of our stock rating tool -- the Zacks Rank.
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 Parsley 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 $0.23 per share for the current quarter represents a change of -25.81% from the number reported a year ago.
Over the last 30 days, the Zacks Consensus Estimate for Parsley Energy has increased 10.54% because four estimates have moved higher while two have gone lower.
Current-Year Estimate Revisions
The company is expected to earn $1.37 per share for the full year, which represents a change of -2.84% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Parsley Energy. Over the past month, six estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 8.43%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Parsley Energy currently carries 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.
While strong estimate revisions for Parsley Energy have attracted decent investments and pushed the stock 6.8% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.