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Looking for a stock that has consistently exceeded earnings expectations and may maintain a continuous upward trend in the next quarterly report? ServiceNow (NOW) belongs to the Zacks Computers-IT Services industry and may be a good candidate.
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When reviewing the last two reports, the software manufacturer that automates the company’s technical operations has recorded a strong momentum that exceeds profit expectations. In the past two quarters, the company averaged 15.88% higher than expected.
In the most recent quarter, ServiceNow estimated earnings per share of $1.20, but it reported earnings per share of $1.42, which is unexpectedly 18.33%. For the previous quarter, the consensus was expected to be $1.34 per share, while actual earnings per share were $1.52, which is unexpectedly 13.43%.
Price and EPS surprise
Considering this revenue history, ServiceNow’s recent estimates have been rising. In fact, the company’s Zacks earnings ESP (Expected Surprise Forecast) is positive, which is a good sign that earnings have exceeded expectations, especially when you combine this metric with its good Zacks ranking.
Our research shows that stocks with positive ESP and Zacks ranking third (hold) or better produce positive surprises nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that exceed consensus may be as high as 7.
The Zacks Earnings ESP compares the most accurate estimate with the Zacks consensus estimate for this quarter; the most accurate estimate is a version of the Zacks Consensus, the definition of which is related to change. The idea here is that analysts revise their estimates to have the latest information before earnings are released, which may be more accurate than they and others who have contributed to the consensus predicted earlier.
ServiceNow’s current earnings ESP is +4.32%, indicating that analysts are increasingly optimistic about its near-term earnings potential. When you combine this positive earnings ESP with the Zacks Rank #2 (Buy) of this stock, it indicates that another beat may be coming. The company’s next earnings report is expected to be released on October 27, 2021.
For the return ESP indicator, it is important to note that a negative value will reduce its predictive power; however, a negative return ESP does not indicate lack of return.
Many companies eventually exceeded popular earnings per share expectations, but this may not be the only basis for their stocks to rise. On the other hand, some stocks may hold their ground even if they fail to meet consensus expectations in the end.
Therefore, it is very important to check the company’s earnings ESP before the quarterly release to increase the chances of success. Make sure to use our earnings ESP filter to find the best stocks to buy and sell before reporting.
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ServiceNow, Inc. (NOW): Free stock analysis report
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