Meta Platforms (META) Set for Earnings Report: Optimism Abounds

As the earnings report for Meta Platforms (META) approaches, the market anticipates a substantial increase in earnings compared to last year. For the quarter ending in September 2024, analysts project that the company will show growth in both earnings and revenue. This consensus outlook is crucial for understanding the company's financial health, and the actual performance in the upcoming report could significantly affect the stock price.

The release of the earnings report is scheduled for October 30, and if the reported numbers exceed expectations, it could lead to an uptick in the stock's value. Conversely, failing to meet these expectations could result in a drop.

While the immediate effects on the stock price and future earnings potential will largely depend on what management communicates during the earnings call, it is beneficial to analyze the likelihood of a positive earnings surprise.

Zacks Consensus Estimate

Analysts predict that Meta will report earnings of $5.17 per share for the quarter, representing a year-over-year increase of 17.8%. Additionally, revenues are expected to reach approximately $40.16 billion, marking a 17.6% increase from the same quarter last year.

Estimate Revisions Trend

In the past 30 days, the consensus earnings per share (EPS) estimate has risen by 0.81%. This change reflects how analysts are collectively adjusting their expectations based on new information. It is important to note that individual analyst revisions might not always correlate with the overall trend.

Earnings Whisper

Analyst revisions leading up to earnings can provide hints about business conditions for the reporting period. The Zacks Earnings ESP (Expected Surprise Prediction) model compares the Most Accurate Estimate with the Zacks Consensus Estimate. The Most Accurate Estimate is a new version of the consensus EPS estimate, based on the latest information available to analysts before the earnings report.

Through this approach, a positive or negative Earnings ESP reading suggests the potential deviation from the consensus estimate. Notably, a positive Earnings ESP is often a strong predictor of an earnings beat, especially when paired with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold). Historically, stocks with this combination have a positive surprise rate of nearly 70%. Conversely, a negative Earnings ESP does not necessarily indicate an earnings miss, making predictions less reliable for stocks rated #4 (Sell) or #5 (Strong Sell).

How Have the Numbers Shaped Up for Meta Platforms?

For Meta Platforms, the Most Accurate Estimate currently exceeds the Zacks Consensus Estimate, reflecting a recent optimistic shift in analysts' perspectives. This situation results in an Earnings ESP of +2.83%. Furthermore, the stock enjoys a Zacks Rank of #2, reinforcing the expectation that Meta Platforms is likely to outperform the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

When predicting future earnings, analysts often consider how well a company has met past consensus estimates. For instance, in the last reported quarter, analysts expected Meta to announce earnings of $4.70 per share but were surprised when the actual earnings reached $5.16, resulting in a +9.79% surprise. Throughout the last four quarters, the company has successfully beaten consensus EPS estimates each time.

Bottom Line

A earnings beat or miss is not the sole reason for a stock's subsequent movement. Many stocks can decline despite an earnings beat due to other disappointments. Similarly, unexpected positive developments can lead to gains even after an earnings miss. Nevertheless, investing in stocks that are anticipated to exceed earnings expectations can improve chances of success. Therefore, examining a company’s Earnings ESP and Zacks Rank before the earnings release is essential. Utilize resources to identify strong stock candidates based on these metrics.

Overall, Meta Platforms appears to be a promising candidate for an earnings beat. However, investors should take into account other factors as well before making any investment decisions regarding this stock before the earnings report.

An Industry Player's Expected Results

Focusing on a competitor within the same sector, PayPal (PYPL) is expected to report earnings of $1.08 per share for the quarter ending in September 2024, which indicates a year-over-year decrease of 16.9%. However, the company is projected to generate revenues of $7.86 billion, which is a 5.9% increase compared to last year.

The consensus EPS estimate for PayPal has been revised upward by 1.2% over the last month. An updated Most Accurate Estimate also indicates a positive Earnings ESP of 1.92%, coupled with a Zacks Rank of #3 (Hold), suggesting a strong likelihood that it will beat the consensus EPS estimate, as the company has done consistently in the previous four quarters.

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Meta, Earnings, Growth