Consensus Estimates
For any given stock there may be from 1 to 40 brokerage analysts following the company and making EPS estimates. For more than 25 years, Zacks has been tracking these individual sell-side analyst estimates and creating consensus EPS estimates. The consensus estimate is the average of all the current estimates made available by brokerage analysts. Consensus estimates are more advantageous because they reduce the risk of any single analyst making an incorrect forecast.
Zacks Consensus Estimate = the average of all current EPS estimates
Zacks calculates a consensus estimate for the current quarter, the next quarter, the current fiscal year, the next fiscal year, and as a long-term growth rate. These consensus estimates are the benchmark by which the company will be judged by the investment community. A company can:
- Meet - report the same earnings as forecast
- Beat - report better earnings than forecast
- Miss - report worse earnings than forecast
Missing a forecast is the most dreaded outcome, since it suggests that a company is not performing as well as investors thought. A stock's price will often tumble in response to an earnings miss.
Estimate Revisions
Although the consensus estimate provides a useful measure by which to gauge a company's performance, changes to earnings estimates may provide even greater value to investors. Leonard Zacks' 1979 study proved that the stocks most likely to outperform are the ones whose earnings estimates are being raised. Similarly, the stocks most likely to underperform are the ones whose earnings estimates are being lowered.
Individual and institutional investors can (and do) use Zacks Investment Research to find this important information. Every day, Zacks receives research reports from approximately 150 brokerage firms, with many of these firms providing data on a daily or intraday basis. The earnings data and stock recommendations are promptly entered into our database.
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Zacks Rank Guide Table of Contents
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