AMC Entertainment (AMC – Free Report) is expected to show a year-over-year decline in earnings over the lowest earnings when reporting results for the quarter ending December 2020. This widely known consensus outlook gives a good idea of the earnings picture. of the company, but how the results compared to these estimates is a powerful factor that could affect its stock price in the short term.
The earnings report could help the stock rally if these key numbers beat expectations. On the other hand, if they fail, the stock may go down.
While management’s discussion of trading conditions on the earnings call will primarily determine the sustainability of the immediate price change and future earnings expectations, it is worth taking a disadvantageous view of the odds of a positive EPS surprise.
Zacks consensus estimate
This theater operator is expected to post a quarterly loss of $ 3.39 per share in its next report, representing a year-on-year change of -1068.6%.
Revenues are expected to be $ 181.47 million, 87.5% less than the prior year quarter.
Estimation of the trend of revisions
The consensus EPS estimate for the quarter has been revised by 37.79% more in the last 30 days to the current level. This is essentially a reflection of how hedge analysts have collectively reassessed their initial estimates during this period.
Investors should note that an aggregate change may not always reflect the direction of the estimates revisions by each of the hedging analysts.
Price, consensus and surprise EPS
Whisper of profit
Estimated revisions prior to the publication of a company’s results provide clues about the trading conditions for the period whose results are being published. Our proprietary surprise prediction model, the Zacks Earnings ESP (expected surprise prediction), has this information 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 more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts who review their estimates just before the earnings release have the latest information, which could potentially be more accurate than what they and others who contributed to the consensus had previously predicted.
Therefore, a positive or negative earnings ESP reading theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is significant only for positive ESP readings.
A positive earnings ESP is a strong predictor of an earnings hit, particularly when combined with a Zacks # 1 (Strong Buy), 2 (Buy), or 3 (Hold) rank. Our research shows that stocks with this combination produce a positive surprise almost 70% of the time, and a solid Zacks rank actually increases the predictive power of ESP earnings.
Note that a negative earnings ESP reading is not indicative of a profit loss. Our research shows that it is difficult to predict an earnings pace with any degree of confidence for stocks with negative ESP earnings readings and / or Zacks rank of 4 (Sell) or 5 (Strong Sell).
How have the numbers evolved for AMC Entertainment?
For AMC Entertainment, the more accurate estimate is higher than Zacks’ consensus estimate, suggesting that analysts have recently become optimistic about the company’s earnings outlook. This has resulted in an ESP earnings of + 14.69%.
On the other hand, the stock currently has a Zacks Rank of # 2.
Therefore, this combination indicates that AMC Entertainment will likely exceed the consensus EPS estimate.
Does the history of winnings and surprises have any clues?
Analysts often consider the extent to which a company has been able to match consensus estimates in the past while calculating their estimates for future earnings. So it’s worth taking a look at the surprise history to gauge its influence on the next issue.
For the latest reported quarter, AMC Entertainment was expected to post a loss of $ 4.66 per share when in fact it produced a loss of $ 5.70, giving a surprise of -22.32%.
Over the past four quarters, the company has exceeded consensus EPS estimates only once.
Bottom line
A profit or loss of earnings may not be the only basis for a stock to go up or down. Many stocks end up losing ground even though earnings are affected by other factors that disappoint investors. Similarly, unforeseen catalysts help a series of stocks win despite a loss of earnings.
That said, betting on stocks that are expected to exceed earnings expectations increases the odds of success. That’s why it’s worth checking out a company’s ESP earnings and Zacks Rank prior to its quarterly release. Be sure to use our ESP earnings filter to discover the best stocks to buy or sell before they’ve been reported.
AMC Entertainment seems like a compelling candidate to beat earnings. However, investors should also pay attention to other factors to bet on or steer clear of this stock before its earnings release.