What you need to know ahead of the Q2 release

Consumer Portfolio Services (CPSS) is expected to report year-over-year earnings growth on lower revenues when it reports for the quarter ended June 2021. This widely known consensus outlook paints a good picture of the company’s earnings picture, but comparing actual results to these estimates is an important factor that can impact the near-term share price.

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 the sustainability of the immediate price movement and future earnings expectations will largely depend on management’s discussion of business conditions during the earnings call, it is worth limiting the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

This auto lender is expected to post quarterly earnings of $0.20 per share in its upcoming report, which would represent a year-over-year change of +53.9%.

Revenue is expected to be $62.46 million, down 7.2% from the year-ago quarter.

Estimate the trend of change

The consensus EPS estimate for the quarter has not changed over the last 30 days. This broadly reflects how analysts covering the data have collectively re-evaluated their initial estimates during this period.

Investors should note that the aggregate change does not necessarily reflect the direction of estimate revisions by each major analyst.

Price, consensus and EPS surprise

Whisper 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 that 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.

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 for consumer wallet services?

For Consumer Portfolio Services, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, which suggests that there are no recent analyst opinions that differ from those used as the basis for the consensus estimate. This resulted in an earnings ESP of 0%.

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

So this combination makes it difficult to firmly predict that Consumer Wallet Services will beat the consensus EPS estimate.

Does the history of surprising results have any clue?

When calculating estimates of a company’s future earnings, analysts often consider how well the company has been able to match previous estimates. So it’s worth taking a look at the surprise history to gauge its impact on the upcoming issue.

For the last quarter, it was expected that Consumer Portfolio Services would post earnings of $0.23 per share when it actually produced earnings of $0.21, delivering a surprise of -8.70%.

The company has failed to beat consensus EPS estimates in each of the last four quarters.

Bottom line

Improving or lacking earnings may not be the only basis for a stock’s value rising or falling. Many stocks lose value despite good earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite losing profits.

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.

Consumer wallet services don’t seem like a compelling candidate for earnings beats. 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.

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Consumer Portfolio Services, Inc. (CPSS): Free Inventory Analysis Report

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