Analysts Estimate Walgreens Boots Alliance (WBA) to Report a Decline in Earnings: What to Look Out for
Wall Street expects a year-over-year profit decline due to higher sales when the Walgreens Boots Alliance (WBA) releases results for the quarter ending August 2020. This well-known consensus outlook is important in assessing the company's earnings picture, an important factor that could affect short-term stock price when actual results are compared to these estimates.
The earnings report, slated to be released October 15, 2020, could help the stock climb higher if these metrics are better than expected. On the other hand, the stock can move down if it misses.
While management's discussion of the terms and conditions in the context of the profit call mainly determines the sustainability of the immediate price change and future profit expectations, it is worth getting a handicapped insight into the chances of a positive EPS surprise.
Zack's consensus estimate
This largest US drugstore chain is expected to post quarterly earnings of $ 0.96 per share in its upcoming report, a year-over-year change of -32.9%.
Revenue is expected to be $ 34.38 billion, up 1.2% from the year-ago quarter.
Estimation of the revision trend
The consensus-based EPS estimate for the quarter has been lowered 2.26% over the past 30 days to current levels. This largely reflects how the covering analysts collectively reevaluated their original estimates over this period.
Investors should be aware that the direction in which each of the covering analysts' revision of the estimates may not always be reflected in the overall change.
Price, consensus and EPS surprise
Estimates of the revisions made prior to the release of a company's earnings figures provide an indication of the terms and conditions for the period for which the results are released. This insight forms the core of our proprietary surprise prediction model - the Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP compares the most accurate estimate to the Zacks Consensus estimate for the quarter. The most accurate estimate is a newer version of the EPS estimate from Zacks Consensus. The idea is that analysts who revise their estimates just before earnings are released will have the most up-to-date information that could potentially be more accurate than they and others who contributed to the consensus previously predicted.
A positive or negative ESP value for the result theoretically indicates the likely deviation of actual income from the consensus estimate. However, the predictive power of the model is only important for positive ESP values.
A positive profit ESP is a strong predictor of a profit strike, especially in combination with a Zacks rank of 1 (strong buy), 2 (buy) or 3 (hold). Our research shows that stocks with this combination cause a positive surprise almost 70% of the time, and a solid Zacks rank actually increases the predictive power of Earnings ESP.
Please note that a negative ESP value for the result does not indicate a loss of profit. Our research shows that it is difficult to predict a profit hit with any level of confidence for stocks with negative ESP earnings values and / or Zacks rank 4 (sell) or 5 (strong sell).
How have the numbers changed for Walgreens?
For Walgreens, the most accurate estimate is lower than the Zacks consensus estimate, suggesting that analysts have recently been negative on the company's earnings outlook. This has resulted in an ESP result of -3.76%.
On the flip side, the stock currently has a Zacks rank of # 5.
This combination therefore makes it difficult to definitively predict that Walgreens will beat the EPS consensus estimate.
Does the result surprise history have a hint?
Analysts often consider the extent to which a company has met consensus estimates in the past while calculating their estimates for future earnings. So it's worth taking a look at the surprise story to gauge its impact on the number ahead.
For the final quarter of the report, Walgreens was expected to make $ 1.10 per share when it actually made a profit of $ 0.83, which is a surprise of -24.55%.
In the past four quarters, the company has beat EPS consensus estimates twice.
Hit or loss in profit may not be the only basis for a stock moving up or down. Many stocks are losing ground despite falling earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks win despite a loss of earnings.
However, betting on stocks that are expected to beat earnings expectations increases the chances of success. For this reason, it's worth checking a company's ESP and Zacks Rank before its quarterly release. Make sure to use our ESP Profit Filter to find the best stocks to buy or sell before they are reported.
Walgreens doesn't seem like a compelling candidate. However, investors should also consider other factors to bet on this stock or to stay away from it before posting their profits.
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Walgreens Boots Alliance, Inc. (WBA): Free Stock Research Report
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