Analysts believe AutoZone (AZO) to signal lower earnings: what to watch out for

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Wall Street expects year-over-year profits to decline due to weaker revenue when AutoZone (AZO) releases results for the quarter ended August 2021. Although this widely known consensus outlook is Important in assessing a company’s earnings position, a powerful factor that could impact its stock price in the short term is how actual results compare to those estimates.

The action could rise if these key figures exceed expectations for the next earnings report, which is expected to be released on September 21. On the other hand, if they are missing, the action might drop.

While the sustainability of the immediate price change and future profit expectations will primarily depend on management’s discussion of trading conditions when calling profits, it is worth crippling the likelihood of a positive surprise from the market. BPA.

Zacks consensus estimate

The auto parts retailer is expected to post quarterly earnings of $ 29.96 per share in its next report, which represents a -3.1% year-over-year change.

Revenue is expected to reach $ 4.53 billion, down 0.3% from the previous year quarter.

Trend of estimated revisions

The consensus EPS estimate for the quarter has remained unchanged over the past 30 days. This essentially reflects how hedge analysts collectively reassessed their initial estimates during this time period.

Investors should be aware that an overall change may not always reflect the direction of estimate revisions by individual hedge analysts.

Price, consensus and EPS Surprise

Whisper of gains

Revisions to estimates prior to a company’s earnings release provide clues to business conditions for the period in which the earnings are released. Our exclusive surprise prediction model – the Zacks ESP on earnings (Surprise Prediction Expected) – has this idea at its core.

Zacks Earnings ESP compares the most accurate estimate to Zacks’ consensus estimate for the quarter; most accurate estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts who revise their estimates just before the results are released have the latest information, which could potentially be more accurate than they and other consensus contributors predicted earlier.

Thus, a positive or negative ESP reading of 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 ESP on earnings is a good predictor of a pace of earnings, especially when combined with a Zacks # 1 (strong buy), 2 (buy), or 3 (hold) ranking. Our research shows that actions with this combination produce a positive surprise almost 70% of the time, and a solid Zacks ranking actually increases the predictive power of ESP earnings.

Please note that a negative ESP reading of earnings is not indicative of a shortfall. Our research shows that it is difficult to predict a profit beat with any degree of confidence for stocks with negative earnings ESP readings and / or a Zacks ranking of 4 (sell) or 5 (strong sell).

How did the numbers form for AutoZone?

For AutoZone, the more accurate estimate is lower than Zacks’ consensus estimate, suggesting that analysts have recently turned bearish on the company’s earnings outlook. This resulted in an ESP on revenues of -10.61%.

On the flip side, the action currently carries a Zacks rank of # 2.

Thus, this combination makes it difficult to conclusively predict that AutoZone will beat the consensus BPA estimate.

Does the history of earnings surprises contain a clue?

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

For the last reported quarter, AutoZone was predicted to post a profit of $ 19.35 per share when it actually produced a profit of $ 26.48, delivering a surprise of + 36.85%.

In the past four quarters, the company has beaten consensus EPS estimates four times.

Final result

A gain or failure of gains may not be the only basis for upward or downward action. Many stocks end up losing ground despite declining earnings due to other factors that disappoint investors. Likewise, unforeseen catalysts help a number of stocks win despite a shortfall.

That said, betting on stocks that are expected to exceed profit expectations increases the chances of success. That’s why it’s worth checking out a company’s ESP results and Zacks rankings ahead of its quarterly release. Make sure to use our ESP Income Filter to discover the best stocks to buy or sell before they are published.

AutoZone does not appear to be a compelling candidate in terms of earnings. However, investors should also pay attention to other factors in betting on this stock or staying on the sidelines before its results are released.

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