Zacks.com Featured Highlights Include: Crocs, Skechers, Tandem, CyberArk And Fortinet
Zacks Investment Research | Aug 21, 2019 12:24AM ET
For Immediate Release
Chicago, IL – August 21, 2019 - Stocks in this week’s article are Crocs Inc. (NASDAQ:CROX) , Skechers U.S.A. Inc. (NYSE:SKX) , Tandem Diabetes Care Inc. (NASDAQ:TNDM) , CyberArk Software Ltd. (NASDAQ:CYBR) and Fortinet Inc. (NASDAQ:FTNT) .
Beyond Earnings Growth: Focus on Beat with These 5 Stocks
Plain and simple earnings growth may no longer entice investors. Now, earnings improvement (no matter how big it is) seems inadequate for solid moves in the market. It is the “BEAT” that matters the most and leads one to a lucrative investment.
What’s an Earnings Beat?
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.
This is because investors always try to take position ahead of time and look for stocks that are likely to come up with stellar performances. Now, since Wall Street analysts project earnings of companies after much deliberation, their estimates act as investment leads.
Why Give Earnings Beats So Much Precedence?
After all, only earnings beat can give investors a clear picture of a company’s strength when an industry-wide earnings recession is felt.
Also, a 20% earnings rise (though apparently looks good) doesn’t tell you everything about the company’s performance. This might represent decelerating earnings growth momentum over the years or quarters, raising questions over the company’s fundamentals.
Also, seasonal fluctuations come into play at times. 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.
How to Find Stocks that Can Beat
Now, since it is difficult to foretell 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 consistency in surpassing 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: Zacks Investment Research
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