Micron (MU) is expected to deliver a year-on-year increase in higher-income earnings if it reports results for the quarter ended November 2020. This well-known consensus outlook gives a good idea of the company’s earnings picture, but how the actual results compared to these estimates is a powerful factor that can affect the share price in the short term.
The earnings report, which is expected to be released on January 7, 2021, could help the stock move higher if these key figures are better than expected. On the other hand, if they miss it, the stock may move lower.
Although management’s discussion of the operating conditions in the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it is worth having a bad insight into the chances of a positive surprise profit.
Zacks Consensus Estimates
This disc maker is expected to post quarterly earnings of $ 0.71 per share in its upcoming report, which represents a year-on-year change of + 47.9%.
Revenue is expected to be $ 5.73 billion, 11.4% higher than in the previous year.
Estimate review trend
The consensus EPS estimate for the quarter has been revised 53.22% higher to its current level over the past 30 days. It is essentially a reflection of how the coverage analysts jointly reconsidered their initial estimates over this period.
Investors should keep in mind that a total change may not always reflect the direction of the coverage analysts’ calculation.
Price, consensus and EPS surprise
Earnings whisper
Estimate reviews before releasing a company’s earnings, giving clues to the business conditions for the period from which the results appear. This insight is at the heart of our own surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP compares the most accurate estimate with the Zacks consensus estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts who review their estimates just before an income statement have the latest information, which may be more accurate than they and others who previously predicted the consensus.
Thus, a positive or negative ESP reading theoretically indicates the likely deviation from the actual merits of the consensus estimate. However, the predictive power of the model is only important for positive ESP readings.
A positive earnings ESP is a strong predictor of an earnings battle, especially when combined with a Zacks Rank # 1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination deliver a positive surprise almost 70% of the time, and a solid Zacks Rank increases the predictive power of Earnings ESP.
Note that a negative earnings ESP reading is not an indication of a earnings error. Our research shows that it is difficult to predict a earnings trend with any degree of confidence for equities with negative earnings ESP readings and / or Zacks rank of 4 (sell) or 5 (sell strongly).
How did the numbers form for Micron?
For Micron, the most accurate estimate is the same as the Zacks consensus estimate, which suggests that there are no recent views from analysts that differ from what is considered the consensus estimate. This resulted in a earnings ESP of 0%.
On the other hand, the stock currently has a Zacks rating of 1.
This combination therefore makes it difficult to finally predict that Micron will beat the US consensus estimate.
Does the surprise history hold any idea?
Analysts often consider the extent to which a company has been able to match consensus estimates in the past with the calculation of their estimates for its future earnings. It is therefore worthwhile to look at the history of surprises to determine its influence on the coming issue.
For the last quarter reported, Micron was expected to earn $ 1 per share if it made $ 1.08, which was a + 8% surprise.
Over the past four quarters, the company has beaten the U.S. consensus estimate three times.
Bottom Line
A meritorious knock or miss may not be the only basis for a stock moving higher or lower. Many stocks end up losing ground despite a profit earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts may cause a number of stocks to rise despite earnings.
That said, it increases the chances of success betting on stocks that are expected to beat earnings. Therefore, it is worth checking the earnings of a company ESP and Zacks Rank before its quarterly release. Be sure to use our earnings ESP filter to find the best stocks to buy or sell before reporting them.
Micron does not appear to be a compelling candidate for merit. However, investors should also pay attention to other factors to bet on or stay away from this stock before releasing the earnings.
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Micron Technology, Inc. (MU): Free Stock Analysis Report
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