Will Methode (MEI) beat estimates again in its next earnings report?

If you’re looking for a stock that has a solid history of beating earnings estimates and is well-positioned to continue that trend in its next quarterly report, you should consider Methode (MEI). This company, which operates in the Zacks Electronics – Connectors industry, is showing the potential for another earnings beat.

Looking at the last two reports, this maker of electrical components for the automotive and computer industries has had a strong streak of beating earnings estimates. The company has beaten estimates by 31.24%, on average, over the last two quarters.

For the last reported quarter, Methode showed earnings of $0.98 per share versus the Zacks consensus estimate of $0.75 per share, representing a surprise of 30.67%. In the previous quarter, the company was expected to post earnings of $0.66 per share and actually came out at $0.87 per share, representing a surprise of 31.82%.

The price and EPS are surprising

Given this earnings history, recent estimates for Methode have been rising. In fact, the company’s Zacks Earnings ESP (Expected Surprise Prediction) is positive, which is a great sign of an earnings beat, especially when you pair this metric with its strong Zacks Rank.

Our research shows that stocks with a combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better deliver a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus, the definition of which refers to a revision. The idea is that analysts revising 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 forecast.

Methode currently has an Earnings ESP of +6.09%, which suggests analysts have become bullish on its near-term earnings potential. When we combine this positive Earnings ESP with the stock’s Zacks Rank #4 (Sell), we can see that another beatdown is likely just around the corner. The company’s next earnings report is expected to be released on August 30, 2018.

When Earnings ESP is negative, investors should remember that this will reduce the predictive power of the indicator. However, a negative value is not an indicator of a stock not making profits.

Many companies end up beating consensus EPS estimates, although that’s not the only reason their stocks appreciate. In addition, some stocks can remain stable even if they end up missing consensus estimates.

For this reason, it is very important to check a company’s Earnings ESP before its quarterly release to increase the chances of success. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they go live.

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