Largo Inc. (LGO) reports first-quarter loss, highest revenue estimates

Largo Inc. (LGO) reported quarterly loss of $0.02 per share versus the Zacks Consensus Estimate of $0.04. For comparison, a year earlier earnings per share were $0.02. These numbers have been adjusted for one-off items.

This quarterly report presented an earnings surprise of -150%. A quarter ago, it was expected that this company would post a loss of $0.09 per share when it actually produced a loss of $0.24, delivering a surprise of -166.67%.

Over the last four quarters, the company has surpassed consensus EPS estimates only once.

Largo Inc., which belongs to the Zacks Alternative Energy – Other industry, posted revenues of $57.42 million for the quarter ended March 2023, surpassing the Zacks Consensus Estimate by 9.02%. For comparison, revenues from a year ago amounted to $42.69 million. The company has topped consensus revenue estimates twice over the last four quarters.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will largely depend on management’s commentary on the earnings call.

Largo Inc. shares have lost about 2.8% since the beginning of the year compared to the S&P 500 index’s gain of 7.3%.

What’s next for Largo Inc.

Although Largo Inc. has underperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Largo Inc.’s estimate revision trend ahead of earnings release. Adverse. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #5 (Strong Sell) for the stock. Therefore, it can be expected that the company’s shares will underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is -$0.07 on revenue of $54.65M for the coming quarter and -$0.04 on revenue of $205.03M for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, Alternative Energy – Other is currently in the bottom 20% of over 250 Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock in the broader Zacks Oils-Energy sector, Crescent Point Energy (CPG), has yet to report earnings for the quarter ended March 2023. The results are expected to be released on May 12.

The oil producer is expected to post quarterly earnings per share of $0.27 per share in its upcoming report, representing a year-over-year change of -15.6%. The consensus EPS estimate for the quarter has not changed over the last 30 days.

Crescent Point Energy’s revenue is expected to be $671.62 million, down 13.1% from the year-ago quarter.

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