Get to know the trend ahead of Q2 release

Wall Street expects year-over-year earnings growth on higher revenues when Remark Holdings (MARK) reports earnings for the quarter ended June 2021. While this well-known consensus outlook is important in assessing the company’s earnings picture, it is a significant factor that could impact the short-term share price is to compare actual results with these estimates.

Shares could rise if these key numbers beat expectations in the upcoming earnings report. 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 change and future earnings expectations, it is worth having some insight into the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The global digital media company is expected to report a quarterly loss of $0.03 per share in its upcoming report, a change of 25% from a year earlier.

Revenue is expected to be $5.78 million, an increase of 151.3% compared to the same quarter last year.

Estimate the trend of change

The consensus EPS estimate for the quarter has not changed over the last 30 days. This broadly reflects how analysts covering the data have collectively re-evaluated their initial estimates during this period.

Investors should note that the direction of each analyst’s estimate revisions will not always be reflected in the aggregate change.

Price, Consensus and EPS Surprise

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. This insight is at the heart of our proprietary surprise prediction model, the Zacks Earnings ESP.

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 for Remark Holdings?

For Remark Holdings, the Most Accurate Estimate is in line with the Zacks Consensus Estimate, which suggests that there are no recent analyst views that differ from those used as the basis for the consensus estimate. This resulted in an earnings ESP of 0%.

On the other hand, the stock currently has a Zacks Rank of #3.

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

Does the history of surprising results hold any clue?

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 surprise history to gauge its impact on the upcoming issue.

For the last reported quarter, Remark Holdings was expected to post a loss of $0.03 per share when it actually produced a loss of $0.05, resulting in a surprise of -66.67%.

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

Summary

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.

Remark Holdings doesn’t seem like a compelling candidate for an earnings beat, but there are other factors investors should look at if they want to bet against or stay away from this stock ahead of its earnings release.

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