FFirst Foundation (FFWM) is expected to report lower year-over-year earnings on higher revenue when it reports results for the quarter ending June 2022. This widely known consensus outlook gives a good sense of the picture of the company’s earnings, but how the actual results compare to those estimates is a powerful factor that could affect its stock price in the short term.
The stock could rise if these key numbers exceed expectations in the next earnings report, which is due out on July 26. On the other hand, if they fail, the stock could go down.
While management’s discussion of trading conditions in the earnings call will primarily determine the sustainability of the immediate price move and future earnings expectations, it’s worth a crippling glimpse of the odds. positive surprise from BPA.
Zacks consensus estimate
This wealth manager and commercial bank is expected to post quarterly earnings of $0.52 per share in its next report, representing a year-over-year change of -10.3%.
Revenue is expected to be $92.85 million, up 29.1% from the prior year quarter.
Trend of estimate revisions
The consensus EPS estimate for the quarter has been revised down 6.52% in the past 30 days from the current level. This essentially reflects how the covering analysts have collectively reassessed their initial estimates over this period.
Investors should keep in mind that the direction of revisions to estimates by each of the covering analysts may not always be reflected in the overall change.
Estimate revisions prior to a company’s earnings release provide clues to business conditions for the period for which earnings are released. Our proprietary surprise prediction model — the Zacks ESP Earnings (Expected Surprise Prediction) – has this idea at its core.
The Zacks Earnings ESP compares the most accurate estimate to the Zacks consensus estimate for the quarter; the most accurate estimate is a more recent version of Zacks Consensus’ EPS estimate. The idea here is that analysts revising their estimates just before the earnings release have the latest information, which could potentially be more accurate than they and other consensus contributors predicted earlier.
Thus, a positive or negative reading of the ESP on earnings theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is only significant for positive ESP readings.
A positive earnings ESP is a good predictor of an earnings beat, especially when combined with a Zacks rank of #1 (strong buy), 2 (buy), or 3 (hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the timeand a strong Zacks ranking actually increases the predictive power of Earnings ESP.
Please note that a negative ESP reading on earnings is not indicative of a shortfall. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative ESP readings on earnings and/or a Zacks rating of 4 (sell) or 5 (strong sell).
How have the numbers evolved for First Foundation?
For First Foundation, the most accurate estimate is lower than the Zacks consensus estimate, suggesting that analysts have recently turned bearish on the company’s earnings outlook. This translated into an ESP on revenue of -0.38%.
On the other hand, the stock currently carries a Zacks rank of #5.
Thus, this combination makes it difficult to conclusively predict that First Foundation will exceed the EPS consensus estimate.
Does the history of the earnings surprise contain a clue?
Analysts often look at how well a company has been able to match consensus estimates in the past while calculating its estimates for future earnings. It is therefore worth taking a look at the surprise history to assess its influence on the number to come.
For the last reported quarter, First Foundation was expected to post a profit of $0.51 per share when it actually produced a profit of $0.55, offering a surprise of +7.84%.
Over the past four quarters, the company has beaten consensus EPS estimates four times.
A beat or failure in earnings may not be the only basis for a stock to move higher or lower. Many stocks end up losing ground despite declining earnings due to other factors that disappoint investors. Similarly, unexpected catalysts help a number of stocks gain despite a shortfall.
That said, betting on stocks that are expected to exceed earnings expectations increases the odds of success. That’s why it’s worth checking a company’s ESP earnings and Zacks ranking before it’s quarterly release. Be sure to use our Income ESP filter to discover the best stocks to buy or sell before they are released.
First Foundation doesn’t seem like a compelling candidate to beat profits. However, investors should also pay attention to other factors to bet on this stock or walk away from it before its results are released.
The expected results of an industry player
Among Zacks Banks – Southwest industry stocks, Southside Bancshares (SBSI) is expected to soon post earnings of $0.80 per share for the quarter ending June 2022. This estimate indicates year-over-year variation. of +23.1%. Revenue this quarter is expected to be $62.9 million, up 5.3% from the prior year quarter.
Over the past 30 days, the consensus EPS estimate for Southside Bancshares has been revised down 5.6% to the current level. Nonetheless, the company now has an earnings ESP of 0.00%, reflecting an equal most accurate estimate.
This ESP of earnings, combined with its No. 2 (buy) Zacks rank, makes it difficult to conclusively predict that Southside Bancshares will exceed the consensus EPS estimate. In the past four quarters, the company has exceeded consensus EPS estimates three times.
Stay up to date with upcoming results announcements with the Zacks Earnings Schedule.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.