A+ Investor subscribers have access to stock grades for over 7,000 stocks for factors of value, growth, momentum, quality and earnings estimate revisions. The Earnings Estimate Revisions Grade ranks companies by the strength of their recent quarterly earnings surprises and earnings revisions for the upcoming fiscal quarter and year. Using the A+ Stock Grades Screener, you can isolate those companies that grade highly based on earnings estimates.
Stock prices generally reflect the market’s consensus of a full array of company, industry, regulatory and economic forces in play at any time. Consensus estimates are the average of the estimated earnings and sales levels made by analysts who are following specific companies.
Select A+ Investor from My Tools at AAII.com to open your A+ Investor Toolkit. Then choose the Stock Grades Screener link.
Use the sliding scale under each factor to widen or narrow the range of graded stocks passing the screen. You can then sort the newly generated list of companies by a factor ranking by clicking on the column header.
When using earnings estimates, consider that the current price generally reflects the consensus estimate already, so earnings estimate strategies tend to focus on surprises (reported earnings that differ from analyst estimates) and revisions (analyst changes to their estimates). Even a slight change in projections can have a major impact on stock prices.
Stocks of companies that report earnings significantly exceeding analyst expectations (positive earnings surprise) tend to outperform the market, while those with negative surprises tend to underperform. When earnings estimates are revised significantly upward—5% or more—stocks tend to show above-average performance. Stocks of firms with downward revisions show below-market performance.
The component scores used to arrive at the Earnings Estimate Revisions Grade are shown on the Grades tab of a stock’s Stock Evaluator page. You can click on a company’s ticker to access it from anywhere on AAII.com. The components of the Earnings Estimate Revisions Grade examine the magnitude of a company’s earnings surprises for the last two reported fiscal quarters, as well as the change in the consensus estimate for the current fiscal year over the last month and last three months.
