Looking for a stock that has consistently beaten earnings estimates and could be well placed to keep the streak alive in its next quarterly report? Sonic Automobile (SAH – Free Report), which belongs to Zacks Automotive – Retail and Whole Sales, might be a great candidate to consider.
This car dealership has had a nice streak of profit estimate overruns, especially when looking at the two previous reports. The average surprise for the last two quarters was 45.61%.
For the last reported quarter, Sonic Automotive made a profit of $ 2.63 per share against Zacks’ consensus estimate of $ 1.64 per share, which is a surprise of 60.37%. For the previous quarter, the company was expected to post earnings of $ 0.94 per share and it actually made earnings of $ 1.23 per share, delivering a surprise of 30.85%.
Price and EPS Surprise
With this earnings history in mind, recent estimates have risen for Sonic Automotive. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a good sign of increased profits, especially when you combine this metric with its nice Zacks ranking.
Our research shows that stocks with the combination of a positive ESP and Zacks Rank # 3 (Hold) or better produce a positive surprise almost 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that exceed the consensus estimate could reach seven.
Zacks Earnings ESP compares the most accurate estimate to Zacks’ consensus estimate for the quarter; the most accurate estimate is a Zacks consensus version whose definition is linked to change. The idea here is that analysts who revise their estimates just before the results are released have the latest information, which could potentially be more accurate than they and other consensus contributors predicted earlier.
Sonic Automotive currently has an ESP on earnings of + 20.03%, which suggests that analysts have become optimistic about its near-term earnings potential. When you combine this positive earnings ESP with the stock’s # 1 Zacks ranking (strong buy), it shows that another rhythm may be right around the corner. The company’s next earnings report is expected to be released on October 28, 2021.
Investors should note, however, that a negative reading of ESP earnings is not indicative of a shortfall, but a negative value reduces the predictive power of this metric.
Many companies end up beating the consensus EPS estimate, although that’s not the only reason their stocks are winning. Additionally, some stocks may remain stable even if they end up missing the consensus estimate.
For this reason, it is very important to check a company’s earnings PSE before it is published quarterly to increase the chances of success. Be sure to use our ESP Earnings Filter to uncover the best stocks to buy or sell before they get published.