SM Energy (SM) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this independent oil and gas company, 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.
For SM Energy, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $1.93 per share, which is a change of +23.72% from the year-ago reported number.
Over the last 30 days, two estimates have moved higher for SM Energy while two have gone lower. As a result, the Zacks Consensus Estimate has increased 13.23%.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $6.78 per share, representing a year-over-year change of +15.11%.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for SM Energy. Over the past month, one estimate has moved higher compared to two negative revisions, helping the consensus estimate increase 12.09%.
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
While strong estimate revisions for SM Energy have attracted decent investments and pushed the stock 6% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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