Subscribe to Entrepreneur for $5
Subscribe

Surging Earnings Estimates Signal Upside for SM Energy (SM) Stock

SM Energy (SM) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

By
This story originally appeared on Zacks

Investors might want to bet on SM Energy (SM), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

- Zacks

Analysts' growing optimism on the earnings prospects of this independent oil and gas company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for SM Energy, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $0.13 per share, which is a change of +360% from the year-ago reported number.

Over the last 30 days, two estimates have moved higher for SM Energy while one has gone lower. As a result, the Zacks Consensus Estimate has increased 67.44%.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $0.33 per share represents a change of +243.48% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for SM Energy. Over the past month, three estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 62.5%.

Favorable Zacks Rank

Thanks to promising estimate revisions, SM Energy currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on SM Energy because of its solid estimate revisions, as evident from the stock's 24.7% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.



Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it's poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks' Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

SM Energy Company (SM): Free Stock Analysis Report

 

To read this article on Zacks.com click here.