Can Advanced Energy (AEIS) Run Higher on Rising Earnings Estimates?
Investors might want to bet on Advanced Energy Industries (AEIS), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.
Analysts' growing optimism on the earnings prospects of this maker of power-conversion products is driving estimates higher, which 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. This insight is at the core of our stock rating tool -- the Zacks Rank.
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 Advanced Energy Industries, 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.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $1.83 per share, which is a change of +48.8% from the year-ago reported number.
Over the last 30 days, two estimates have moved higher for Advanced Energy compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 38.08%.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $8.20 per share, representing a year-over-year change of +27.9%.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Advanced Energy. Over the past month, four estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 10.85%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Advanced 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
Investors have been betting on Advanced Energy because of its solid estimate revisions, as evident from the stock's 23.8% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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