Wall Street expects a year-over-year increase in earnings on higher revenue when AMC Entertainment ( AMC ) reports results for the quarter ended September 2023. While this widely known consensus outlook is important in gauging the company’s earnings picture, a powerful factor, that could affect the stock price in the short term is how actual results compare to those forecasts.
Shares could rise if these key numbers beat expectations in the upcoming earnings report, which is expected to be released on November 8. On the other hand, if they miss, the stock could go lower.
Although management’s discussion of the business terms of the earnings call will mostly determine the resilience of the immediate price change and future earnings expectations, it pays to have an unfavorable view of the chances of a positive earnings per share surprise.
Zacks Consensus Estimate
This movie theater operator is expected to report a quarterly loss of $0.22 per share in its upcoming report, representing a year-over-year change of +89%.
Revenue is expected to be $1.25 billion, up 28.7% from the previous quarter.
Trend of rating revisions
The consensus EPS estimate for the quarter has been revised 24.3% higher 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 rating revisions by each of the covering analysts.
Forecast revisions before a company’s results are released offer an indication of business conditions for the period whose results are released. Our proprietary surprise forecasting model – Zacks Earnings ESP (Expected Surprise Forecast) – has this insight at its core.
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Earnings ESP compares the top estimate to the Zacks Consensus Estimate for the quarter; the most accurate estimate is a newer version of the Zacks Consensus EPS estimate.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 AMC Entertainment?
For AMC Entertainment, the Best Estimate was lower than the Zacks Consensus Estimate, suggesting that analysts are recently bearish on the company’s earnings outlook. This resulted in a gain ESP of -17.83%.
On the other hand, the stock currently carries a Zacks Rank #1.
So this combination makes it difficult to confidently predict that AMC Entertainment will beat the EPS consensus estimate.
Is there any trace of the history of Surprise earnings?
Analysts often consider how well a company has been able to match consensus estimates in the past when calculating their forecasts for future earnings. So it’s worth looking at the history of the surprise to gauge its impact on the upcoming number.
For the last reported quarter, AMC Entertainment was expected to post a loss of $0.50 per share, when it actually generated a break-even profit, delivering a +100% surprise.
Over the past four quarters, the company has beaten consensus EPS estimates four times.
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.
AMC Entertainment doesn’t seem like a compelling candidate for profit. However, investors should pay attention to other factors to bet on this stock or stay away from it before the earnings release.
Expected results of a player in the industry
Another stock in Zacks’ Leisure & Recreation Services sector, Xponential Fitness ( XPOF ), is soon expected to report earnings of $0.15 per share for the quarter ending September 2023. This estimate shows a year-over-year change of +50 %. Revenue for the quarter is expected to be $74.88 million, up 17.4% from the prior quarter.
The consensus EPS estimate for Xponential Fitness has been revised 7.7% lower over the past 30 days to the current level. However, the lower best estimate resulted in a gain ESP of -4.85%.
This earnings ESP combined with its Zacks Rank #3 (Hold) makes it difficult to definitively predict that Xponential Fitness will beat the consensus EPS estimate. In the past four quarters, the company has topped EPS estimates only once.
Keep up with upcoming earnings announcements with the Zacks Earnings Calendar.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.