Beacon Roofing Supply (BECN) is expected to report a year-over-year profit on higher sales when it reports results for the quarter ended March 2023. How actual results compare to these estimates is a strong factor affecting could affect the short-term share price.
The stock could rise if these key numbers beat expectations in the upcoming earnings report, which is expected to be released on May 4th. On the other hand, if they miss, the stock could fall.
While the sustainability of the immediate price change and future earnings expectations will largely depend on management’s discussion of business conditions at the time of earnings announcement, it pays to limit the likelihood of an upside EPS surprise.
Zack’s consensus estimate
This roofing materials distributor is expected to report quarterly earnings of $0.62 per share in its upcoming report, a -30.3% year-over-year change.
Revenue is expected to be $1.78 billion, up 5.5% from the year-ago quarter.
Trend of estimated revisions
Consensus EPS estimate for the quarter has been revised down 0.52% over the last 30 days to current levels. This essentially reflects how the covering analysts collectively reassessed their original estimates over this period.
Investors should note that the direction of estimate revisions by each of the covering analysts may not always be reflected in the overall change.
Estimate revisions prior to a company’s earnings release provide an indication of business conditions for the period for which results are released. This insight is at the core of our proprietary surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction).
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 revise their estimates just before an earnings release have the latest information, which may be more accurate than what they and others contributing to the consensus previously predicted.
Thus, in theory, a positive or negative outcome ESP value indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is only significant for positive ESP measurements.
A positive Earnings ESP is a strong indicator of an Earnings Beat, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination produce an upside surprise almost 70% of the time, and a solid Zacks rank even increases the predictive power of Earnings ESP.
Please note that a negative Earnings ESP value is not an indication of an Earnings Miss. Our research shows that it is difficult to predict with any degree of certainty an earnings increase for stocks with negative ESP results and/or a Zacks rank of 4 (Sell) or 5 (Strong Sell).
How have the numbers for beacon roofing developed?
For Beacon Roofing, the most accurate estimate is lower than Zacks’ consensus estimate, suggesting that analysts have been negative on the company’s earnings outlook of late. This has resulted in an Earnings ESP of -0.20%.
On the other hand, the stock currently carries a Zacks rank of #3.
So this combination makes it difficult to predict conclusively that Beacon Roofing will beat the consensus EPS estimate.
Does the win surprise story have a clue?
Analysts often consider a company’s historical ability to match consensus estimates while calculating estimates for its future earnings. So, it’s worth taking a look at the surprise history to gauge its impact on the number to come.
For the most recent quarter under review, Beacon Roofing was expected to report earnings of $1.16 per share when it actually posted earnings of $1.22, a +5.17% surprise.
In the past four quarters, the company has beaten consensus estimates for earnings per share four times.
A win or miss may not be the only basis for a stock to move up or down. Many stocks end up losing ground despite a drop in earnings due to other factors disappointing investors. Similarly, unanticipated catalysts are helping a number of stocks surge despite a drop in earnings.
However, betting on stocks that are expected to beat earnings expectations increases the odds of success. For this reason, it pays to review a company’s Earnings ESP and Zacks Rank prior to its quarterly release. Make sure to use our earnings ESP filter to uncover the best stocks to buy or sell before they are reported.
Beacon roofing doesn’t seem like a compelling candidate for increasing profits. However, investors should also be aware of other factors when investing in this stock or staying away ahead of earnings releases.
Stay up to date on upcoming earnings announcements with the Zacks Earnings Calendar.
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Beacon Roofing Supply, Inc. (BECN): Free Stock Research Report
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