The market is SonoTek Corporation (SOTK – Free report) shows a year-over-year decline in earnings due to lower earnings when reporting results for the quarter ended November 2022. Its short-term stock price is how actual results compare to those estimates.
If those key numbers are better than expected, the earnings report could help the stock price rise. Conversely, if you miss it, the stock price may fall.
The sustainability of immediate price volatility and future earnings projections is highly dependent on management’s discussion of business conditions on earnings calls, but it’s worth handicapping the potential for a positive EPS surprise.
Sachs’ Consensus Estimation
The company is expected to post quarterly earnings of $0.01 per share in its next report, representing a -50% change year-over-year.
Revenue is expected to be $3.9 million, down 11.8% from the year-ago quarter.
Estimated Modified Trend
Consensus EPS estimates for the quarter were revised down 50% to current levels over the past 30 days. This essentially reflects how the covering analysts collectively reassessed their original estimates for this period.
Investors should be aware that aggregated changes may not necessarily reflect the direction of revisions to estimates by each of the analysts covered.
Earnings whisper
By revising forecasts before a company announces its financial results, it becomes a clue to know the economy during the period when financial results are announced. Our proprietary surprise prediction model, Zacks Earnings ESP (Expected Surprise Prediction), is based on this insight.
Zacks Earnings ESP compares the most accurate estimate to the quarterly Zacks Consensus estimate. The Most Accurate Estimate is the latest version of the Zacks Consensus EPS Estimate. The idea here is that analysts who revise their estimates just before the earnings release have the most up-to-date information. This may be more accurate than previously predicted by analysts and others contributing to the consensus.
Therefore, positive or negative earnings ESP readings theoretically indicate a high probability of real earnings from the consensus estimate. However, the predictive power of the model is significant only for positive ESP measures.
A positive earnings ESP is a strong predictor of earnings beats, especially when combined with Zacks ranks 1 (strong buy), 2 (buy), or 3 (hold). Our research shows that this combination of stocks creates a positive surprise almost 70% of the time, and a solid Zacks rank actually increases the predictive power of the Earnings ESP.
Note that a negative Earnings ESP number does not indicate a loss of revenue. Our research shows that it is difficult to predict profits with any degree of confidence for stocks with a negative Earnings ESP and/or a Zacks Rank of 4 (sell) or 5 (strong sell). It has been.
How were SonoTek Corporation’s numbers shaped?
For SonoTek Corporation, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, suggesting that there are no recent analyst views that differ from what has been considered to derive a consensus estimate. Earnings ESP is now 0%.
On the other hand, the stock is currently ranked 3rd in the Zacks rank.
Therefore, this combination makes it difficult to ultimately predict that SonoTek Corporation will exceed the consensus EPS estimate.
Does the earnings surprise history hold any clues?
Analysts often consider how well a company has been able to match consensus estimates in the past when calculating future earnings estimates. Therefore, it’s worth looking at the history of surprises to gauge their impact on future numbers.
For its last reported quarter, Sonotek Corporation was expected to post earnings of $0.01 per share, even though it actually posted earnings of $0.01, which should come as no surprise.
The company has failed to beat the consensus EPS forecast in any of the last four quarters.
Conclusion
Increases or decreases in earnings may not be the only reason a stock price rises or falls. Many stocks end up falling despite their strong performance due to other factors that disappoint investors. Similarly, unexpected catalysts have seen many stocks rise despite failing to generate earnings.
That said, betting on stocks that are expected to outperform earnings expectations increases your odds of success. This is why it’s worth checking out the company’s Earnings ESP and Zacks Rank ahead of each quarterly release. Take advantage of the Earnings ESP filter to find the best stocks to buy or sell before they’re reported. .
Sonotec Corporation does not appear to be a strong revenue contender. However, investors should also pay attention to other factors to bet on this stock or stay away from it before the earnings announcement.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
