First Merchants (FRME) Surges 6.0%: Is This an Indication of Further Gains?

First Merchants (FRME) shares soared 6% in the last trading session to close at $35.72. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 20.5% loss over the past four weeks.

After stumbling significantly over the past few trading day, the trend reversed. Following the fall out of the collapse of two S&P 500 banks, the investors regained some confidence in the sector amid the steps taken by the regulators to avert a full-blown bank run. Moreover, inflation numbers came out as expected, which further reinforced investor optimism. These developments drove the FRME stock higher.

This bank is expected to post quarterly earnings of $1.17 per share in its upcoming report, which represents a year-over-year change of +33%. Revenues are expected to be $174.8 million, up 36.4% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For First Merchants, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on FRME going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

First Merchants is a member of the Zacks Banks - Midwest industry. One other stock in the same industry, Enterprise Financial Services (EFSC), finished the last trading session 3.2% higher at $47.53. EFSC has returned -16.2% over the past month.

For Enterprise Financial Services, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $1.40. This represents a change of +13.8% from what the company reported a year ago. Enterprise Financial Services currently has a Zacks Rank of #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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