Discover trends ahead of Q4 launch

The market expects OptiNose (OPTN) to deliver year-over-year earnings growth on higher revenues when it reports its earnings for the quarter ended December 2021. This widely known consensus outlook is important in assessing a company’s earnings picture, but it has a huge impact. A factor that can impact a company’s short-term share price is how actual results compare to estimates.

The stock could rise if these key numbers beat expectations in the upcoming earnings report. On the other hand, if they don’t, the stock could 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

In the upcoming report, the specialty pharmaceutical company is expected to report quarterly loss of $0.22 per share, which would represent a year-over-year change of +52.2%.

Revenue is expected to be $21.63 million, up 32.3% from the prior-year quarter.

Estimate the trend of change

The consensus EPS estimate for the quarter remains unchanged over the last 30 days. This is broadly a reflection of how the covering analysts collectively have re-evaluated their initial estimates during this period.

Investors should note that the total change may not necessarily reflect the direction of each individual analyst’s estimate revisions.

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ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a newer version of the Zacks Consensus EPS.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.

Thus, a positive or negative Earnings ESP reading theoretically indicates a 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 combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise almost 70% of the time, and a solid Zacks Rank actually enhances the predictive power of 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).

What do the numbers look like for OptiNose?

In the case of OptiNose, 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 #3.

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

Are the financial results surprising? Does history matter?

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 history of surprises to assess its impact on the upcoming issue.

In the last reported quarter, it was expected that OptiNose would post a loss of $0.37 per share when it actually produced a loss of $0.32, delivering a surprise of +13.51%.

The company has topped consensus earnings per share 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 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.

OptiNose doesn’t seem like a compelling candidate to beat earnings. However, investors should also look at other factors if they want to bet on this stock or stay away from it ahead of its earnings release.

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

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

OptiNose, Inc. (OPTN): Free stock analysis report

To read this article on Zacks.com click here.

Zacks Investment Research