Ultra Clean Holdings (UCTT - 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.
The upward trend in estimate revisions for this chipmaking equipment services company reflects growing optimism of analysts on its earnings prospects, 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.
For Ultra Clean, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $0.23 per share for the current quarter, which represents a year-over-year change of 0%.
Over the last 30 days, three estimates have moved higher for Ultra Clean compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 36.84%.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $0.87 per share represents a change of -47.59% from the year-ago number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Ultra Clean. Over the past month, three estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 13.84%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Ultra Clean currently carries a Zacks Rank #1 (Strong 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 Ultra Clean have attracted decent investments and pushed the stock 41.5% 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.