Ardmore Shipping (ASC) Q2 earnings expected to fall

Wall Street is expecting year-over-year earnings declines on lower revenues when Ardmore Shipping (ASC) reports results for the quarter ended June 2023. While this widely-known consensus forecast is important for assessing the company’s earnings situation, a strong factor that could impact its stock price in the near term is how well actual results stack up against those estimates.

The earnings report, due on August 1, 2023, could help the stock rise if those key numbers come out better than expected. On the other hand, if they fall short of expectations, the stock could fall.

While management’s discussion of business 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

The shipping company is expected to report quarterly earnings of $0.56 per share in its upcoming report, which would represent a year-over-year change of -30.9%.

Revenue is expected to be $61.89 million, down 6.2% from the prior-year quarter.

Estimate revision trend

The consensus EPS estimate for the quarter has been revised down 19.1% 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

Estimate revisions ahead of a company’s earnings release provide an indication of 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ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a newer version of the Zacks Consensus EPS.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 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 does not indicate an earnings miss. Our research shows that it’s difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank 4 (Sell) or 5 (Strong Sell).

What are the numbers for Ardmore Shipping?

In the case of Ardmore Shipping, 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. As a result, the Earnings ESP is 0%.

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

Therefore, it is difficult to clearly predict that Ardmore Shipping will beat consensus earnings per share estimates.

Are the financial results surprising? Does history matter?

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, Ardmore Shipping was expected to post earnings of $1.04 per share when the actual result was $1.04, which comes as no surprise.

The company has topped consensus earnings per share estimates three times 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 beat earnings expectations increases the odds of success. That’s why it’s worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly earnings release. Be sure to use our Earnings ESP Filter to discover the best stocks to buy or sell before they release.

Ardmore Shipping doesn’t seem like a compelling candidate for an earnings beat. However, investors should look at other factors when betting on this stock or staying away from it ahead of its earnings release.

Expected results of an industry player

Another stock from the Zacks Transportation and Shipping industry, Costamare (CMRE) is soon likely to post earnings of $0.50 per share for the quarter ending June 2023. This estimate indicates a year-over-year change of -47.4%. Revenues for the quarter are expected to reach $256.53 million, down 11.8% from the year-ago quarter.

Over the past 30 days, the consensus EPS estimate for Costamare has been revised 20.6% down to current levels. Nevertheless, the company now has an Earnings ESP of 0.00%, reflecting an even Most Accurate Estimate.

This Earnings ESP, combined with its Zacks Rank #4 (Sell), makes it difficult to clearly predict that Costamare will beat consensus EPS estimates. The company has topped consensus EPS estimates twice over the last four quarters.

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