Will Textron (TXT) beat estimates again in its next earnings report?

Have you been looking for stocks that could be well positioned to maintain their strong performance streak in the upcoming report? Textron (TXT) is worth considering, which belongs to the Zacks Aerospace – Defense industry.

The maker of Cessna small planes and Bell helicopters has a well-established reputation for beating earnings estimates, especially looking at the past two reports. The company boasts an average earnings surprise of 9.88% over the past two quarters.

Textron was expected to post earnings of $1 per share in the most recent quarter, but instead it reported earnings of $1.07, representing a surprise of 7%. For the prior quarter, the consensus estimate was $0.94 per share when the company actually posted earnings of $1.06 per share, representing a surprise of 12.77%.

Price and EPS surprise

In the case of Textron, estimates are trending higher, thanks in part to a history of earnings surprises. And when you look at the positive Zacks Earnings ESP (Expected Surprise Rate), that’s a great indicator of future earnings growth, especially when paired with the solid Zacks Rank.

Our research shows that stocks with a combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better deliver a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a revision of the Zacks Consensus definition that is related to revision. The idea is that analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

Textron currently has an Earnings ESP of +1.05%, which suggests analysts have recently become bullish on the company’s earnings prospects. This positive Earnings ESP combined with the stock’s Zacks Rank #2 (Buy) indicates that another beatdown is likely just around the corner. We expect the company’s next earnings report to be released on April 27, 2023.

Investors should remember, however, that a negative Earnings ESP reading does not indicate failure to make profits, but a negative value reduces the predictive power of the indicator.

Many companies end up beating consensus EPS estimates, but that may not be the only basis for their stock growth. On the other hand, some stocks can maintain their position even if they end up missing consensus estimates.

For this reason, it is very important to check a company’s earnings ESP before its quarterly release to increase the chances of success. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

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