Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering Johnson Controls (JCI), which belongs to the Zacks Security and Safety Services industry.
This diversified technology and industrial company has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two quarters was 5.80%.
For the most recent quarter, Johnson Controls was expected to post earnings of $0.40 per share, but it reported $0.43 per share instead, representing a surprise of 7.50%. For the previous quarter, the consensus estimate was $0.73 per share, while it actually produced $0.76 per share, a surprise of 4.11%.
Price and EPS Surprise
Thanks in part to this history, there has been a favorable change in earnings estimates for Johnson Controls lately. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the stock is positive, which is a great indicator of an earnings beat, particularly when combined with its solid Zacks Rank.
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
Johnson Controls has an Earnings ESP of +3.32% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock's Zacks Rank #3 (Hold), it shows that another beat is possibly around the corner. The company's next earnings report is expected to be released on April 30, 2021.
With the Earnings ESP metric, it's important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.
Many companies end up beating the consensus EPS estimate, though this is not the only reason why their shares gain. Additionally, some stocks may remain stable even if they end up missing the consensus estimate.
Because of this, it's really important to check a company's Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Johnson Controls International plc (JCI): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.