Robinhood Markets, Inc. ( HOOD ) is expected to deliver annualized earnings growth on higher revenue when it reports results for the quarter ending September 2023. This widely known consensus outlook gives a good idea of the company’s earnings picture, but how the actual results compare with these valuations is a powerful factor that can affect the stock price in the short term.
The earnings report, which is expected to be released on November 7, 2023, could help the stock move higher if these key numbers are better than expected. 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 the business terms of the earnings call, it is worth reducing the likelihood of a positive EPS surprise.
Zacks Consensus Estimate
This company is expected to report a quarterly loss of $0.10 per share in its upcoming report, representing a year-over-year change of +50%.
Revenue is expected to be $480.16 million, up 33% from last year’s quarter.
Trend of rating revisions
The consensus EPS estimate for the quarter has been revised 33.33% 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 direction of a rating revision by each of the covering analysts may not always be reflected in the overall change.
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 the basis 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Earnings ESP compares the top estimate to the Zacks Consensus Estimate for the quarter; the most accurate estimate is a newer version of the Zacks Consensus EPS estimate.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 the Numbers Shaped for Robinhood Markets, Inc.
About Robinhood Markets, Inc. 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 Robinhood Markets, Inc. will beat consensus EPS estimate.
Is there any trace of the history of Surprise earnings?
While calculating forecasts for a company’s future earnings, analysts often consider 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, Robinhood Markets, Inc. was expected to will report a loss of $0.02 per share when it actually generates a profit of $0.03, delivering a surprise of +250%.
Over the past four quarters, the company has beaten consensus EPS estimates three 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.
Robinhood Markets, Inc. 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
Among the stocks in the Zacks Financial – Investment Bank Moelis (MC) industry, it is soon expected to post earnings of $0.05 per share for the quarter ending September 2023. This estimate indicates a yearly change of -86.5%. Revenue for this quarter is expected to be $243.22 million, up 4.2% from the previous quarter.
Over the past 30 days, the EPS consensus estimate for Moelis has been revised 55.2% to the current level. However, the company now has an earnings ESP of 0.00%, reflecting the same best estimate.
When combined with a Zacks Rank of #4 (Sell), this earnings ESP makes it difficult to confidently predict that Moelis 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.