Wall Street expects a year-over-year decline in revenue due to lower earnings when Ford Motor Company (F) reports results for the quarter ended March 2022. While this widely recognized consensus view is important in gauging the company’s earnings picture, a strong factor that could affect prices the short term stock is how actual results compare to these forecasts.
The earnings report, which is expected to be released on April 27, 2022, could help stocks move higher if these key figures come in better than expectations. On the other hand, if it misses, the stock could move lower.
While management’s discussion of business conditions on earnings calls will largely determine the sustainability of immediate price changes and future earnings expectations, it’s good to have insight that stands in the way of a positive EPS surprise opportunity.
Zacks Consensus Estimate
The company is expected to post quarterly earnings of $0.41 per share in its forthcoming report, which represents a year-on-year change of -53.9%.
Revenue is expected to be $29.95 billion, down 10.7% from last year’s quarter.
Estimate Revision Trends
The EPS consensus forecast for the quarter has been revised 14.46% lower over the past 30 days to current levels. It is essentially a reflection of how the analysts who cover collectively reassess their initial forecasts over this period.
Investors should bear in mind that aggregate changes may not necessarily reflect the direction of revisions to estimates by the individual analysts covering.
EPS Price, Consensus and Surprise
Revised estimates ahead of the company’s earnings release offer a hint of business conditions for the period in which the results are out. Our proprietary surprise prediction model — Zacks Earnings ESP (Expected Surprise Prediction) — has this insight at its core.
Zacks Earnings ESP compares Most Accurate Estimates to Zacks Consensus Estimates for the quarter; Most Accurate Estimate is an updated version of the Zacks Consensus EPS estimate. The idea here is that analysts who revise their forecasts just before the earnings release have up-to-date information, which is potentially more accurate than what they and others contributed to the previously predicted consensus.
Thus, a positive or negative Earning ESP reading theoretically indicates a possible deviation of actual earnings from the consensus forecast. However, the predictive power of the model is only significant for positive ESP readings.
A positive ESP Revenue is a strong predictor of earnings beats, especially when combined with a Zacks Rating of #1 (Buy Strong), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination generate positive surprises almost 70% of the time, and a solid Zacks Rating actually increases the predictive power of ESP Earnings.
Please note that a negative Earning ESP reading does not indicate lost earnings. Our research shows that it is difficult to predict earnings beats with any level of confidence for stocks with negative Earning ESP readings and/or a Zacks Rating of 4 (Sell) or 5 (Strong Selling).
How Are Numbers Formed for Ford Motor Company?
For Ford Motor Company, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, indicating that analysts have recently become bullish on the company’s earnings outlook. This results in +6.62% Earning ESP.
On the other hand, the stock currently has a Zacks Rating of #5.
Thus, this combination makes it difficult to predict conclusively that Ford Motor Company will beat the consensus EPS estimate.
Does a History of Income Surprises Hold a Lead?
When calculating forecasts for a company’s future earnings, the analyst often considers the extent to which he or she is able to match past consensus forecasts. So, it’s worth looking at the history of the shock to gauge its effect on the upcoming numbers.
For the last reported quarter, it was expected that Ford Motor Company would post earnings of $0.43 per share when it actually made a profit of $0.26, giving it a surprise of -39.53%.
Over the past four quarters, the company has beaten consensus EPS estimates three times.
The main thing is
An earnings beat or loss may not be the only basis for a stock moving higher or lower. Many stocks ended up losing ground despite beating earnings due to other factors that disappointed investors. Similarly, unexpected catalysts helped a number of stocks rise despite the earnings miss.
That said, betting on stocks that are expected to beat earnings expectations does increase the chances of success. This is why it’s a good idea to check the company’s ESP Earnings and Zacks Ratings before the quarterly releases. Be sure to use our ESP Earnings Filter to uncover the best stocks to buy or sell before reporting.
Ford Motor Company doesn’t seem like an attractive candidate. However, investors should pay attention to other factors as well to bet on this stock or stay away from it before its earnings release.
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