Wall Street expects an annualized decline in earnings due to lower revenues when PennyMac Mortgage (PMT) releases results for the quarter ending June 2021. may affect its share price in the short term by comparing actual results with these estimates.
The stock could rally if these key numbers exceed expectations in the upcoming income statement. On the other hand, if they miss, the stock could move lower.
While the sustainability of immediate price changes and future earnings expectations will largely depend on management’s discussion of business conditions in the income statement, it is worth reducing the likelihood of a positive per share surprise.
Sachs consensus assessment
The financial services company is expected to post quarterly earnings of $ 0.57 per share in its forthcoming report, up 87.4% from the same period last year.
Revenue is expected to be $ 171.55 million, down 69.3% year-on-year.
Assessment of the trend of change
The consensus EPS for the quarter has remained unchanged for the past 30 days. In essence, it is a reflection of how the leading analysts collectively revised their initial estimates for this period.
Investors should be aware that the direction in which each analyst revises their estimates may not always be reflected in the cumulative change.
The revision of estimates prior to the publication of the company’s income statement provides a key to understanding the business environment for the period to be published. This insight is at the heart of our patented Zacks Earnings ESP (Expected Surprise Prediction) model.
Zacks Earnings ESP compares the most accurate estimate to the Zacks consensus estimate for the quarter; The most accurate estimate is the latest version of the Zacks Consensus earnings per share estimate. The idea here is that analysts revising their estimates just before the earnings report is released have the most recent information that could potentially be more accurate than what they and other consensus participants predicted earlier.
Thus, a positive or negative ESP of earnings theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the predictive power of the model is only important for positive ESP values.
A positive earnings ESP is a strong predictor of profit growth, especially when combined with a Zacks rank of # 1 (strong buy), 2 (buy), or 3 (hold). Our research shows that stocks with this combination cause a positive surprise almost 70% of the time, and a solid Zacks rating actually increases the predictive power of Earnings ESP.
Note that a negative ESP for earnings does not indicate a miss. Our research shows that it is difficult to predict earnings growth with any degree of certainty for stocks with negative ESP earnings and / or a Sachs rating of 4 (sell) or 5 (strong sell).
How have PennyMac mortgage numbers changed?
For PennyMac Mortgage, the most accurate estimate matches the Zacks consensus estimate, suggesting that there is no recent analyst opinion that differs from what was assumed for the consensus estimate. This resulted in a 0% profit for ESP.
On the other hand, the stock currently has a Zacks # 3 rating.
Thus, this combination makes it difficult to conclusively predict that PennyMac Mortgage will outperform consensus earnings per share estimates.
Is there a clue to the story of profit and loss surprises?
When calculating estimates of a company’s future earnings, analysts often consider the extent to which it may have matched past consensus estimates. So, it’s worth taking a look at the surprise history to gauge its impact on the upcoming date.
In the most recent quarter, PennyMac Mortgage was expected to earn $ 0.60 per share, while net profit was $ 0.67, unexpectedly + 11.67%.
The company has quadrupled its net earnings per share consensus over the past four quarters.
Excess or decline in profits cannot be the only reason a stock moves up or down. Many stocks end up losing ground despite declining earnings due to other factors that disappoint investors. Likewise, unanticipated catalysts are helping a number of stocks rally despite lost profits.
However, stock betting that is expected to exceed earnings expectations does increase the odds of success. This is why it is worth checking the ESP earnings and Zacks ranking before releasing the quarterly issue. Be sure to use our earnings ESP filter to identify the best stocks to buy or sell before they report.
PennyMac Mortgage doesn’t seem like a compelling profit candidate. However, investors should be aware of other factors in order to bet or stay away from these shares pending the release of the financials.
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