AcelRx Pharmaceuticals (ACRX) May Report Negative Earnings: Check the Trend Ahead of Next Week’s Release – May 3, 2023

Wall Street expects annual earnings growth on higher revenue when AcelRx Pharmaceuticals (ACRX Free Report ) reports results for the quarter ended March 2023. While this widely known consensus outlook is important for gauging a company’s earnings picture, a powerful factor that could affect its share price in the near term is how actual results are compared to these predictions.

Shares could rise if these key numbers beat expectations in the upcoming earnings report, which is expected to be released on May 10. On the other hand, if they miss, the stock could go lower.

While the sustainability of the immediate price change and future earnings expectations will depend mostly on management’s discussion of business conditions on the earnings call, it is worth limiting the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

This drugmaker is expected to report a quarterly loss of $0.71 per share in its upcoming report, representing a year-over-year change of +40.8%.

Revenue is expected to be $2.9 million, up 559.1% from the previous quarter.

Trend of rating revisions

The consensus EPS estimate for the quarter has been revised 10.26% lower over the past 30 days to the current level. This is essentially a reflection of how covering analysts have collectively re-evaluated their initial estimates over this period.

Investors should note that the aggregate change may not always reflect the direction of revisions to estimates by each of the covering analysts.

Earnings Whisper

Forecast revisions before a company’s results are released offer an indication of business conditions for the period whose results are released. This insight is at the heart of our proprietary surprise forecasting model – Zacks Earnings ESP (Expected Surprise Forecast).

The Zacks Earnings ESP compares the top estimate to the Zacks Consensus Estimate for the quarter; the most accurate estimate is a newer version of the Zacks Consensus EPS estimate. The idea here is that analysts who revise their forecasts just before the earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

Thus, 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 was significant only for positive ESP readings.

A positive earnings ESP is a strong predictor of earnings outperforming, 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 nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of ESP earnings.

Please note that a negative earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict earnings growth with any degree of confidence for stocks with negative earnings ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How did the numbers shape up for AcelRx Pharmaceuticals?

For AcelRx Pharmaceuticals, the most accurate estimate is the same as the Zacks Consensus Estimate, which suggests there are no recent analyst opinions that differ from what is considered the consensus estimate. This resulted in an ESP of earnings of 0%.

On the other hand, the stock currently carries a Zacks Rank #3.

So this combination makes it difficult to confidently predict that AcelRx Pharmaceuticals will beat the consensus EPS estimate.

Is there any trace of the history of Surprise earnings?

While calculating forecasts for a company’s future earnings, analysts often take into account how well it has managed to match past consensus estimates. So it’s worth looking at the history of the surprise to gauge its impact on the upcoming number.

For the last reported quarter, AcelRx Pharmaceuticals was expected to report a loss of $0.10 per share, when it actually generated a loss of $1, delivering a -900% surprise.

Over the past four quarters, the company has topped consensus EPS estimates just once.

Bottom row

Earnings overshoots or misses may not be the only basis for a stock to move up or down. Many stocks end up losing ground despite earnings growth due to other factors that frustrate investors. Likewise, unforeseen catalysts are helping a number of stocks rise despite a lack of earnings.

However, betting on stocks that are expected to beat earnings expectations does increase the odds of success. That’s why it’s worth checking the company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure you use our ESP Earnings Filter to find the best stocks to buy or sell before they are reported.

AcelRx Pharmaceuticals does not appear to be a compelling profit candidate. However, investors should pay attention to other factors to bet on this stock or stay away from it before the earnings release.

Expected results from an industry player

Revolution Medicines, Inc. (RVMD Free Report ), another stock in the Zacks Medical – Drugs industry, is expected to post earnings per share of $0.84 for the quarter ending March 2023. This estimate indicates a year-over-year change of -7.7%. Revenue for the quarter is expected to be $4.17 million, down 45% from the prior quarter.

The consensus EPS estimate for Revolution Medicines, Inc. has been revised 5.5% higher over the past 30 days to the current level. However, the higher best estimate resulted in a gain ESP of 6.70%.

This earnings ESP, combined with its Zacks Rank #2 (Buy), suggests that Revolution Medicines, Inc. most likely to beat consensus EPS estimate. Over the past four quarters, the company has beaten consensus EPS estimates three times.

Keep up with upcoming earnings announcements with the Zacks Earnings Calendar.

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