What to Know Ahead of Next Week’s Release
The market expects RE / MAX (RMAX) to see a year-over-year profit increase with higher sales when it releases results for the quarter ending March 2021. However, this well-known consensus outlook is important in assessing the company’s earnings picture. A key factor that could affect short-term stock price is comparing actual results to these estimates.
The stock could go higher if these metrics beat expectations in the upcoming earnings report, which is expected to be released May 6th. However, if they are absent, the stock could move lower.
While management’s discussion of the terms and conditions in the context of the profit call mainly determines the sustainability of the immediate price change and future profit expectations, it is worthwhile to get an obstructive insight into the chances of a positive EPS surprise.
Zack’s consensus estimate
This residential real estate broker franchisor is expected to post quarterly earnings of $ 0.49 per share in its upcoming report, up 25.6% year over year.
Revenue is expected to be $ 74.74 million, an increase of 6.4% over the prior year quarter.
Estimation of the revision trend
The consensus-based EPS estimate for the quarter has remained unchanged for the past 30 days. This essentially reflects how the covering analysts have jointly reevaluated their original estimates over this period.
Investors should be aware that an aggregate change may not always reflect the direction of the estimated changes by each of the covering analysts.
Price, consensus and EPS surprise
Estimates of the revisions made prior to the release of a company’s earnings figures provide an indication of the terms and conditions for the period for which the results are released. Our proprietary surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction) – has this insight at its core.
The Zacks Earnings ESP compares the most accurate estimate to the Zacks Consensus estimate for the quarter. The most accurate estimate is a newer version of the EPS estimate from Zacks Consensus. The idea is that analysts who revise their estimates just before earnings are released will have the latest information that could potentially be more accurate than they and others who contributed to the consensus had previously predicted.
The story goes on
A positive or negative ESP value for the result theoretically indicates the likely deviation of actual income from the consensus estimate. However, the predictive power of the model is only important for positive ESP values.
A positive profit ESP is a strong predictor of a profit strike, especially in combination with a Zacks rank of 1 (strong buy), 2 (buy) or 3 (hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks rank actually increases the predictive power of Earnings ESP.
Please note that a negative ESP value for the result does not indicate a loss of profit. Our research shows that it is difficult to predict a profit hit with any level of confidence for stocks with negative ESP earnings values and / or Zacks rank 4 (sell) or 5 (strong sell).
How have the numbers for RE / MAX developed?
For RE / MAX, the most accurate estimate is the same as the Zacks consensus estimate, suggesting that there are no current analyst opinions different from those used to derive the consensus estimate. This has resulted in an ESP result of 0%.
On the other hand, the stock currently has a Zacks rank of # 5.
This combination therefore makes it difficult to definitively predict that RE / MAX will beat the EPS consensus estimate.
Does the result surprise history have a hint?
Analysts often consider the extent to which a company has met consensus estimates in the past while calculating their estimates for future earnings. So it’s worth taking a look at the surprise story to gauge its impact on the number ahead.
For the final quarter of the report, RE / MAX was expected to make $ 0.44 per share when it actually made a profit of $ 0.47, which is a surprise of + 6.82%.
In the past four quarters, the company has only exceeded EPS consensus estimates once.
Hit or loss in profit may not be the only basis for a stock moving up or down. Many stocks are losing ground despite falling earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks win despite a loss of earnings.
However, betting on stocks that are expected to beat earnings expectations increases the chances of success. For this reason, it’s worth checking a company’s ESP and Zacks Rank before its quarterly release. Make sure to use our ESP Profit Filter to find the best stocks to buy or sell before they are reported.
RE / MAX doesn’t seem like a convincing winner. However, investors should also consider other factors to bet on this stock or to stay away from it before posting their profits.
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