Why Alphabet (GOOGL) Could Beat Earnings Estimates Again

If you're in the market for a stock that has consistently outperformed earnings expectations, Alphabet (GOOGL) should be on your radar. This tech giant, part of the Zacks Internet - Services industry, is well-positioned for another potential earnings beat in its upcoming quarterly report.

Over the last two earnings reports, Alphabet has demonstrated a remarkable ability to exceed analysts' earnings estimates. On average, the company has surpassed expectations by 8.63% during the past two quarters.

In its most recent quarter, Alphabet reported earnings of $2.15 per share. This figure exceeded the Zacks Consensus Estimate of $2.12 per share, marking a surprise of 1.42%. In the quarter before that, Alphabet was projected to earn $1.83 per share but delivered a robust $2.12 per share, resulting in an impressive surprise of 15.85%.

Evaluating Price and EPS Surprises

Alphabet's earnings estimates have been on the rise, largely due to its track record of surprises in the past. Moreover, the company currently boasts a positive Zacks Earnings ESP (Expected Surprise Prediction), which is a strong sign of its likelihood to beat earnings expectations. This is particularly significant when combined with a solid Zacks Rank.

Research indicates that stocks holding a combination of a positive Earnings ESP and a Zacks Rank of #3 (Hold) or higher achieve positive earnings surprises almost 70% of the time. Thus, if you have ten stocks that fit this profile, about seven of them are likely to exceed consensus estimates.

The Zacks Earnings ESP measures the difference between the Most Accurate Estimate and the Zacks Consensus Estimate for the particular quarter. The Most Accurate Estimate is based on the most up-to-date information, reflecting any last-minute changes by analysts that can offer better insights than earlier forecasts.

As it stands, Alphabet carries an Earnings ESP of +1.64%, indicating that analysts are becoming more optimistic about the company's earnings outlook. This favorable Earnings ESP, coupled with a Zacks Rank of #3 (Hold), suggests that a further earnings beat may be on the horizon.

If an Earnings ESP is negative, it's important for investors to understand that this can diminish its predictive value. However, a negative figure does not automatically indicate an earnings miss.

Many companies manage to exceed consensus EPS estimates; nonetheless, this isn't the sole reason their stock prices might rise. Conversely, some stocks may remain stable even if they fall short of expectations. Therefore, assessing a company's Earnings ESP before its quarterly report is crucial to enhancing the chances of making informed investment decisions. Utilizing our Earnings ESP Filter can help identify the best stocks for buying or selling prior to their earnings announcements.

Earnings, Alphabet, Stocks