The market expects Enbridge (ENB) to report a decline in earnings year-over-year due to lower revenue when it reports its financial results for the fiscal year ending June 2024. While this widespread consensus outlook is important in assessing the company’s earnings picture, a powerful factor that can impact the stock price in the near term is how actual results compare to these estimates.
If these key numbers beat expectations when the company reports earnings on August 2, 2024, the stock price could rise. On the other hand, if they fall short, the stock price could fall.
While management’s discussion of the business situation during the earnings call will largely determine the sustainability of near-term price movement and future earnings expectations, it’s worth getting some handicap insight into the possibility of a positive EPS surprise.
Zacks Consensus Estimate
The oil and natural gas transportation and transmission company is expected to report quarterly earnings of $0.46 per share in its next report, which would represent a -9.8% change from the prior-year period.
Revenue is expected to fall 44.9% year over year to $4.28 billion.
Estimate Revision Trends
The current quarter’s EPS estimate consensus has been revised downward by 0.36% over the past 30 days to the current level, essentially reflecting the covering analysts collectively reevaluating their original expectations during this period.
Investors should note that the direction of estimate revisions by individual analysts may not necessarily reflect an overall change in the outlook.
Whispers of Revenue
Estimate revisions ahead of a company’s earnings release can provide clues about the business condition in the period the results are released, and this insight is at the core of our proprietary surprise prediction model, the Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP compares the Most Accurate Estimate for the quarter to the Zacks Consensus Estimate. The Most Accurate Estimate is the more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the most current information, and therefore may be more accurate than what they and other analysts contributing to the consensus previously estimated.
Thus, a positive or negative Earnings ESP reading theoretically indicates how far actual earnings will deviate from the consensus forecast, although the predictive power of the model only holds for positive ESP readings.
The story continues
A positive Earnings ESP is a strong predictor of earnings estimate beats, 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 nearly 70% of the time, and a solid Zacks Rank actually enhances the predictive power of the Earnings ESP.
Please note that a negative Earnings ESP value does not mean that earnings will be lower than expected: Our research shows that for stocks with negative Earnings ESP values and/or a Zacks Rank #4 (Sell) or #5 (Strong Sell), it is difficult to predict with any degree of confidence that earnings will beat expectations.
What are Enbridge’s numbers?
In Enbridge’s case, the Most Accurate estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company’s earnings outlook, resulting in an Earnings ESP of -0.31%.
Meanwhile, the stock currently carries a Zacks Rank #3.
Therefore, this combination makes it difficult to definitively predict that Enbridge will beat consensus EPS estimates.
Does the history of earnings surprises offer any clues?
Analysts often consider how well a company has matched consensus expectations in the past when calculating forecasts for future profits, so it’s worth looking at the history of surprises to gauge the impact on future numbers.
In its most recent quarterly report, Enbridge was expected to post earnings of $0.59 per share when it actually produced earnings of $0.68, delivering a surprise of +15.25%.
Over the last four quarters, the company has surpassed consensus EPS estimates two times.
Conclusion
Better than expected or lower than expected earnings may not be the only reason a stock price rises or falls. Many stocks end up falling despite better than expected earnings because of other factors that disappoint investors. Similarly, many stocks rise despite lower than expected earnings because of an unexpected catalyst.
That said, your odds of success increase when you bet on stocks expected to beat earnings estimates, which is why it’s worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell ahead of the report.
Enbridge doesn’t look like an attractive candidate to beat earnings, but investors should also pay attention to other factors when it comes to whether to bet on or avoid the stock ahead of the earnings release.
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