What you need to know ahead of the Q4 release

Wall Street is expecting year-over-year earnings growth on higher revenue when Brookline Bancorp (BRKL) reports results for the quarter ended December 2022. While this widely known consensus outlook is important in assessing the company’s earnings picture, a significant factor that could impact the stock’s near-term price is how actual results compare to those 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 during the earnings conference call will have the greatest impact on the sustainability of immediate price action and future earnings expectations, it’s worth having insight into the likelihood of a positive earnings surprise.

Zacks Consensus Estimate

The bank holding company is expected to report quarterly earnings of $0.40 per share in its upcoming report, representing a year-over-year change of 8.1%.

Revenue is expected to be $87.79 million, up 6.9% from the year-ago quarter.

Estimate revision trend

The consensus EPS estimate for the quarter has been revised down 25% over the past 30 days to the current level. This is essentially a reflection of how the analysts covering the aggregate have reassessed their initial estimates during that time.

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

Whispers 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.

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 the numbers changed for Brookline?

For Brookline, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, which suggests there are no recent analyst views that differ from those taken into account in arriving at the Consensus Estimate. This resulted in an Earnings ESP of 0%.

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

So this combination makes it difficult to clearly predict that Brookline will beat consensus EPS estimates.

Does the history of surprising results hold any clue?

Analysts often consider how well a company has been able to match consensus estimates in the past when calculating their estimates of future earnings. So it’s worth looking at the history of surprises to gauge its impact on upcoming numbers.

In the last reported quarter, it was expected that Brookline would post earnings of $0.36 per share when it actually produced earnings of $0.40, representing a surprise of +11.11%.

The company has beaten consensus EPS estimates twice over 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 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.

Brookline 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 on or stay away from this stock ahead of its earnings release.

Expected results of an industry player

Soon, another company from the Zacks Financial – Savings and Loan industry, Great Southern Bancorp (GSBC), is expected to report earnings of $1.68 per share for the quarter ended December 2022. This estimate indicates a year-over-year change of +47.4%. Revenue for the quarter is expected to be $62.53 million, up 17.1% from the same quarter last year.

Over the last 30 days, the consensus EPS estimate for Great Southern Bancorp has been revised 6.2% down to the current level. Nevertheless, the company now has an Earnings ESP of -2.09%, which reflects a lower Most Accurate Estimate.

This Earnings ESP, combined with the Zacks Rank #2 (Buy), makes it difficult to clearly predict that Great Southern Bancorp will beat consensus EPS estimates. The company has topped consensus EPS estimates twice over the last four quarters.

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

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