Get to know the trend ahead of next week’s release

Wall Street expects year-over-year earnings growth on higher revenues when Soho House & Co (SHCO) reports earnings for the quarter ended March 2023. While this widely known consensus outlook is important in assessing the company’s earnings picture, a powerful factor that may impact a company’s short-term share price is to compare actual results with estimates.

Shares could move higher if these key numbers meet expectations in the upcoming earnings report, due on May 12. On the other hand, if these key numbers are not met, the stock could fall.

While the sustainability of the immediate price movement and future earnings expectations will largely depend on management’s discussion of business conditions during the earnings call, it is worth limiting the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The operator of luxury, members-only hotels and clubs under the Soho House brand is expected to report a quarterly loss of $0.18 per share in its upcoming report, representing a +40% year-over-year change.

Revenue is expected to be $260.71 million, up 35.8% from the same quarter last year.

Estimate the trend of change

The consensus EPS estimate for the quarter has been revised upwards by 3.23% over the last 30 days to the current level. This broadly reflects how analysts covering the data have collectively re-evaluated 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

Revisions to estimates prior to a company’s earnings release provide an indication of business conditions in the period in which the earnings are expected to be released. Our proprietary surprise prediction model, the Zacks Earnings ESP, is based on this insight.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is a newer revision of the Zacks Consensus EPS estimate. The idea is that analysts reviewing their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants 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 paired with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks in this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.

Please note that a negative earnings ESP reading does not mean a loss of earnings. Our research shows that it is difficult to predict earnings growth with any degree of confidence for stocks with negative ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How have the numbers changed at Soho House?

For Soho House, 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 resulted in an earnings ESP of -1.12%.

On the other hand, the stock currently has a Zacks Rank of #2.

So this combination makes it difficult to confidently predict that Soho House will beat the consensus EPS estimate.

Does the history of surprising results have any clue?

When calculating future earnings estimates, analysts often consider how well a company has been able to match consensus estimates in the past. So it’s worth taking a look at the surprise history to gauge its impact on the upcoming issue.

In the last quarter, it was expected that Soho House would post a loss of $0.24 per share when it actually produced a loss of $0.07, delivering a surprise of +70.83%.

Over the last four quarters, the company has surpassed consensus EPS estimates only once.

Bottom line

Improving or lacking earnings may not be the only basis for a stock’s value rising or falling. Many stocks lose value despite good earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite losing profits.

That said, betting on stocks that are expected to exceed earnings expectations increases your chances of success. Therefore, it is worth checking the company’s Earnings Rank and Zacks Rank before their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

Soho House doesn’t seem like a compelling candidate to break profits. 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

Paycor HCM, Inc. is expected to (PYCR), another stock from the Zacks Internet – Software industry, will report earnings per share of $0.15 for the quarter ended March 2023. These estimates indicate a year-over-year change of +36.4%. . Revenue for the quarter is expected to be $154.7 million, up 26.2% from the same quarter last year.

Over the last 30 days, the consensus EPS estimate for Paycor HCM, Inc. has not changed. Nevertheless, the company currently has an Earnings ESP of 3.70%, which reflects a higher most accurate estimate.

This Earnings ESP combined with a Zacks Rank #2 (Buy) suggests that Paycor HCM, Inc. will most likely beat consensus EPS estimates. 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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