Latham Group (SWIM) Earnings Expected to Rise: Should You Buy It?

Wall Street expects year-over-year earnings growth on higher revenues when Latham Group (SWIM) reports earnings for the quarter ended September 2022. While this widely 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.

The stock price could rise if these key numbers beat expectations in the upcoming earnings report, which is due on November 10. On the other hand, if they do not turn out to be true, the share price may fall.

While management’s discussion of operating conditions during the earnings conference call will have the greatest impact on the durability of the immediate price change and future earnings expectations, it is worth having insight into the likelihood of an upside earnings per share surprise.

Zacks Consensus Estimate

This pool manufacturer is expected to post quarterly earnings per share of $0.17 in its upcoming report, representing a year-over-year change of +270%.

Revenue is expected to be $191.85 million, up 18.5% from the same quarter last year.

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 aggregate change does not necessarily reflect the direction of each lead analyst’s estimate revisions.

Whispers about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. Our proprietary surprise forecast model – Zacks Earnings ESP (Expected Surprise Prediction) – has this insight at its core.

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ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a newer version of the Zacks Consensus EPS.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 the analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

So a positive or negative Earnings 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 nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of the 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 Latham Group?

In the case of Latham Group, 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 -47.67%.

On the other hand, the stock currently has a Zacks Rank of 5.

The combination of these factors makes it difficult to confidently predict that Latham Group will beat consensus earnings per share estimates.

Does the history of surprising results have any clue?

When calculating a company’s future earnings estimates, analysts often consider how well it matched previous consensus estimates. So it’s worth looking at a surprising story to assess its impact on the upcoming numbers.

In the last reported quarter, it was expected that Latham Group would post earnings of $0.24 per share when it actually produced earnings of $0.04, delivering a surprise of -83.33%.

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 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 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.

Latham Group doesn’t seem like a compelling candidate to beat earnings. 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.

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

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