Why Square (SQ) Could Beat Earnings Estimates Again
Are you looking for a stock that has consistently outperformed earnings estimates and may be well positioned to keep the streak alive in the next quarterly report? Square (SQ), part of the Zacks internet software industry, could be a good candidate.
In the last two reports, this mobile payment service provider has had a strong streak of above-average earnings estimates. The company has exceeded estimates by an average of 90.99% over the past two quarters.
For the last quarter, earnings were expected to be $ 0.23 per share, up from $ 0.32 per share, a surprise of 39.13%. For the previous quarter, the consensus estimate was $ 0.14 per share when it actually produced $ 0.34 per share, a surprise of 142.86%.
Thanks in part to that history, earnings estimates for Square have changed favorably lately. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) is positive for the stock, which is a good indicator of a profit hit, especially when combined with its solid Zacks Rank.
Our research shows that stocks with the combination of a positive ESP result and a Zacks Rank 3 (Hold) or better cause 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 can be up to seven.
The Zacks Earnings ESP compares the most accurate estimate to the Zacks Consensus estimate for the quarter. The most accurate guess is a version of the Zacks consensus, the definition of which is in terms of changes. The idea is that analysts who revise their estimates just before earnings are released will have the latest information that could potentially be more accurate than they and others who contributed to the consensus had previously predicted.
Square currently has an ESP gain of + 13.96%, suggesting that analysts have been optimistic about the company's earnings outlook lately. That positive ESP result combined with the stock's Zacks Rank 3 (Hold) indicates that another slap may be around the corner.
However, investors should note that a negative ESP value for earnings is not an indication of a loss of profit, but a negative value will reduce the predictive power of this metric.
Many companies ultimately beat the EPS consensus estimate, although that's not the only reason their stocks are up. Additionally, some stocks can stay stable even if they end up missing the consensus estimate.
For this reason, it is very important to review a company's ESP result before its quarterly release to increase the chances of success. Make sure to use our ESP Profit Filter to find the best stocks to buy or sell before they are reported.
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Square, Inc. (SQ): Free Stock Research Report
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