Stock Markets Analysis & Opinion

Why ResMed (RMD) is Poised to Beat Earnings Estimates Again

If you are looking for a stock that has a solid history of beating earnings estimates and is in a good position to maintain the trend in its next quarterly report, you should consider ResMed (RMD). This company, which is in the Zacks Medical – Products industry, shows potential for another earnings beat.

This maker of medical products for respiratory disorders has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two quarters was 9.93%.

For the most recent quarter, ResMed was expected to post earnings of $1.35 per share, but it reported $1.51 per share instead, representing a surprise of 11.85%. For the previous quarter, the consensus estimate was $1.25 per share, while it actually produced $1.35 per share, a surprise of 8%.

Price and EPS Surprise

With this earnings history in mind, recent estimates have been moving higher for ResMed. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its nice Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

ResMed has an Earnings ESP of +1.59% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock’s Zacks Rank #2 (Buy), it shows that another beat is possibly around the corner.

Investors should note, however, that a negative Earnings ESP reading is not indicative of an earnings miss, but a negative value does reduce the predictive power of this metric.

Many companies end up beating the consensus EPS estimate, but that may not be the sole basis for their stocks moving higher. On the other hand, some stocks may hold their ground even if they end up missing the consensus estimate.

Because of this, it’s really important to check a company’s Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they’ve reported.

Zacks Top 10 Stocks for 2022

In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?

From inception in 2012 through November, the gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.

Be First To New Top 10 Stocks >>

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

ResMed Inc. (RMD): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Source

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Become a Millionaire by Trading Crypto!