What you need to know before the premiere in the first quarter

Northwest Bancshares (NWBI) is expected to report year-over-year earnings growth on higher revenues when it reports earnings for the quarter ending March 2023. This widely known consensus forecast gives a good idea of ​​the company’s earnings picture, but how actual results these estimates is a strong factor that may influence the share price in the short term.

The earnings report could help the stock climb higher if these key numbers are better than expected. On the other hand, if they miss, the stock could fall.

While management’s discussion of business conditions on the earnings call will largely determine the sustainability of the immediate price action and future earnings expectations, it is worth having some insight into the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The Northwest Savings Bank holding company is expected to report quarterly earnings of $0.28 per share in its upcoming report, representing a year-over-year change of +27.3%.

Revenue is expected to be $143.82 million, up 23.6% from the year-ago quarter.

Estimate revision trend

The consensus EPS estimate for the quarter has been revised down 3.45% over the past 30 days to current levels. This essentially reflects how the analysts covering the data collectively reassessed their initial estimates during this period.

Investors should note that the aggregate change does not necessarily reflect the direction of estimate revisions by each major analyst.

Whisper about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. This insight is the basis of our proprietary surprise forecasting model, the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; The Most Accurate Estimate is a newer version of the Zacks Consensus EPS. 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 others contributing to the consensus had previously predicted.

Thus, a positive or negative ESP reading theoretically indicates the likely deviation of actual earnings from consensus estimates. However, the predictive power of the model is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise almost 70% of the time, and a solid Zacks Rank actually enhances the predictive power of Earnings ESP.

It’s important to remember that a negative Earnings ESP reading doesn’t necessarily mean earnings are lost. Our research shows that it’s 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 have Northwest Bancshares’ numbers changed?

In the case of Northwest Bancshares, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company’s earnings prospects. This has led to an Earnings ESP of -2.66%.

On the other hand, the company’s stock currently sports a Zacks Rank #4.

As a result, it is difficult to clearly predict that Northwest Bancshares will beat consensus earnings per share estimates.

Are the financial results surprising? Does history matter?

When calculating estimates of a company’s future earnings, analysts often consider how well the company has been able to match previous estimates. So it’s worth taking a look at the history of surprises to assess its impact on the upcoming issue.

In the last reported quarter, it was expected that Northwest Bancshares would post earnings of $0.32 per share when it actually produced earnings of $0.30, delivering a surprise of -6.25%.

The company has beaten consensus earnings per share estimates twice over the last four quarters.

Bottom Line

Beating or missing earnings may not be the only basis for a stock rising or falling. Many stocks lose ground despite beating gains due to other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite missing earnings.

That said, betting on stocks to beat earnings expectations increases your chances of success. Therefore, it is worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they go live.

Northwest Bancshares doesn’t seem like a compelling earnings beat candidate. However, investors should also pay attention to other factors if they want to bet on or stay away from these stocks ahead of an earnings release.

Expected results of an industry player

OceanFirst Financial (OCFC), another stock in the Zacks Financial – Savings and Loan industry, is expected to post earnings per share of $0.66 for the quarter ended March 2023. This estimate indicates a year-over-year change of +34.7% . Revenue for the quarter is expected to be $116.93 million, up 25.6% from the year-ago quarter.

The consensus EPS estimate for OceanFirst has been revised 5.4% down over the past 30 days to current levels. However, the lower Most Accurate Estimate results in an Earnings ESP of -0.13%.

Combined with a Zacks Rank #3 (Hold), the earnings ESP makes it difficult to firmly predict that OceanFirst will outperform the consensus EPS estimate. The company has beaten consensus EPS estimates in each of the four consecutive quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Northwest Bancshares, Inc. (NWBI): Free Stock Analysis Report

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