Will Roadrunner Transportation (RRTS) Report Negative Earnings in Q1? What You Should Know

Wall Street expects year-over-year earnings growth on lower revenues when Roadrunner Transportation (RRTS) reports earnings for the quarter ended March 2020. While this well-known consensus forecast is important in assessing the company’s earnings situation, a strong factor that could influence on its stock price in the short term is how actual results compare to these estimates.

The earnings report could help the stock move higher if these key numbers come in better than expected. On the other hand, if they don’t meet expectations, 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

In the upcoming report, the transportation and logistics services provider is expected to report quarterly loss of $0.26 per share, which would represent a year-over-year change of +83.5%.

Revenue is expected to be $419.80 million, down 17.2% from the year-ago quarter.

Estimate revision trend

The consensus EPS estimate for the quarter remained unchanged over the past 30 days. This is essentially a reflection of how the analysts covering the aggregate have reassessed their initial estimates during that 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

Estimate revisions ahead of a company’s earnings release provide a guide to business conditions in the period in which the earnings are released. This knowledge is the basis for our proprietary Zacks Earnings ESP (Expected Surprise Prediction) surprise prediction model.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is the newer version 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 a likely deviation of actual earnings from consensus estimates. However, the model’s predictive power 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 deliver a positive surprise almost 70% of the time, and a solid Zacks Rank actually boosts 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).

What are the numbers for Roadrunner?

In the case of Roadrunner, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, suggesting there are no recent analyst views that differ from those considered in deriving the consensus estimate. This leads to an Earnings ESP of 0%.

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

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

Can history give any clues about financial performance?

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, it was expected that Roadrunner would post a loss of $0.40 per share when in fact it produced a loss of $1.52, delivering a surprise of -280%.

The company has failed to beat consensus EPS estimates in each of the last four quarters.

Summary

Beating or missing earnings may not be the only reason a stock goes up or down. Many stocks lose ground despite beating earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite missing earnings.

That said, betting on stocks that are expected to beat earnings expectations increases your chances of success. That’s why it’s worth checking a company’s earnings ranking and Zacks Rank ahead of their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they’re reported.

Roadrunner doesn’t seem like a compelling candidate for better financial results. However, investors should pay attention to other factors when betting on these stocks or staying away from them ahead of the earnings release.

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Roadrunner Transportation Systems, Inc. (RRTS): Free Stock Analysis Report

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