For Immediate Release
Chicago, IL – May 7, 2020 – Stocks in this week’s article are Activision Blizzard Inc. (
ATVI Quick Quote ATVI - Free Report) , Guardant Health Inc. ( GH Quick Quote GH - Free Report) , Vertex Pharmaceuticals Inc. ( VRTX Quick Quote VRTX - Free Report) , Aphria Inc. and Shopify Inc. ( SHOP Quick Quote SHOP - Free Report) . 5 Top-Ranked Stocks to Tap Earnings Beat Potential
Equity investors are all attentive before an earnings release. This is because earnings apparently indicate a company’s financial health. No wonder, solid earnings growth speaks volumes about business well-being, but there is another factor that matters even more — positive earnings surprise or earnings beat. Let’s tell you why it is so important.
What is Earnings Beat?
Investors always try to position themselves ahead of time and look for stocks that are likely to come up with a stellar performance. After much brainstorming, Wall Street analysts project earnings of companies. These estimates act as investment leads.
A positive earnings surprise or earnings beat is typically the case when actual or reported earnings come in above the consensus estimate. Historically, if a company’s earnings manage to beat market expectations, its stock surges post release.
Why Earnings Beat is Superior to Earnings Growth?
A 20% earnings rise (though apparently looks good) doesn’t tell you everything about the company. This might represent a decelerating earnings growth momentum over the years or quarters, raising questions over the company’s fundamentals.
Also, seasonal fluctuations come into the play sometimes. If a company’s Q1 is seasonally weak and Q4 is strong, then it is likely to report a sequential earnings decline. In such cases, growth rates are misleading while judging the true health of a company.
On the other hand, analysts put together their insights and a company’s guidance when giving an earnings estimate. Thus, outperforming that estimate is almost equivalent to beating the company’s own expectation as well as market perception. Of course, this gives you a clear picture of the company’s bottom line. And if the margin of earnings surprise is big, it typically drives the stock higher right after the release.
How to Find Stocks that Can Beat?
Now, since it is difficult to predict if a company will beat or miss in the upcoming earnings season, investors can check the earnings surprise history. An impressive track in this regard generally acts as a catalyst in sending a stock higher. It indicates the company’s ability to surpass estimates. And investors generally believe that the company will have the same trick up its sleeve or in other words is smart enough to beat on earnings in its next release.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/915145/5-topranked-stocks-to-tap-earnings-beat-potential 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. About Screen of the Week
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