Coherent (COHR) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
The upward trend in estimate revisions for this Laser and optics manufacturer reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Coherent, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $1.40 per share for the current quarter represents a change of +53.9% from the number reported a year ago.
The Zacks Consensus Estimate for Coherent has increased 10.75% over the last 30 days, as seven estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $5.38 per share for the full year, which represents a change of +52.4% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Coherent. Over the past month, eight estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 7.55%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Coherent currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for Coherent have attracted decent investments and pushed the stock 30.9% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
