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 ServiceNow (NOW). This company, which is in the Zacks Computers - IT Services industry, shows potential for another earnings beat.
When looking at the last two reports, this maker of software that automates companies' technology operations has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 8.67%, on average, in the last two quarters.
For the last reported quarter, ServiceNow came out with earnings of $3.72 per share versus the Zacks Consensus Estimate of $3.46 per share, representing a surprise of 7.51%. For the previous quarter, the company was expected to post earnings of $2.85 per share and it actually produced earnings of $3.13 per share, delivering a surprise of 9.82%.
Thanks in part to this history, there has been a favorable change in earnings estimates for ServiceNow lately. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the stock is positive, which is a great indicator of an earnings beat, particularly when combined with its solid 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.
ServiceNow has an Earnings ESP of +1.04% 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. The company's next earnings report is expected to be released on January 29, 2025.
With the Earnings ESP metric, it's important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.
Many companies end up beating the consensus EPS estimate, though this is not the only reason why their shares gain. Additionally, some stocks may remain stable 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.
Research Chief 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.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
