Zacks Investment Ideas feature highlights: Yahoo!, Goldman Sachs and
CHICAGO, April 12, 2013
CHICAGO, April 12, 2013 /PRNewswire/ --Today, Zacks Investment Ideas feature
highlights Features: Yahoo! (Nasdaq:YHOO), Goldman Sachs (NYSE:GS) and
Blackstone Group (NYSE:BX).
3 Stocks Set to Beat Estimates
Earnings season is just underway and we still have yet to see a clear picture
of revenue growth, profitability and margin. With the 25 reports or so that
have come in, it's been a very mixed picture. While there haven't been any
bullish standouts, there have been several high-profile negative surprises.
The bottom line is that growth expectations remain weak, a reflection of
underwhelming management guidance and tough comparisons. Tough comparisons and
weak management guidance account for the weak earnings growth picture. Total
earnings reached their highest quarterly total in the first quarter of 2012
and have yet to get back to that level.
Total Q1 earnings are expected to be down -2.6% from the same period last
year, which reflects -0.9% drop in revenues and a modest contraction in
margins. It is amazing that the S&P 500 is up 15% in that same time frame.
As we continue our search for stocks that have a high likelihood of beating
estimates, the Zacks Earnings ESP can be a useful tool in your search. Here
are a few companies that look promising next week:
Bullish ESP Stocks
Yahoo! (Nasdaq:YHOO) is a Zacks Rank #1 stock with a positive earnings ESP of
2.04% for the current quarter. The company is expected to make 24 cents a
share, but our ESP readings are looking for a profit of 25 cents.
While the ESP for Yahoo may not be extreme, they have beat estimates the last
4 quarters in a row with an average beat of 35.13% over the Zacks consensus.
Marissa Meyer has made sweeping changes to the "old tech" company to revive
its core search business and grow its other competencies. YHOO recently made
the news when it recently forked over $30 million for news summarization app
Summly and its 17-year old creator.
It's this aggressiveness and innovative technology that may continue to drive
Yahoo's shares higher.
– Yahoo! reports earnings on April 16th.
Goldman Sachs (NYSE:GS) is a Zacks Rank #3 stock with a positive earnings ESP
of 4.80% for the current quarter; the Zacks Consensus is for a per share
profit of $3.75. with the most accurate at $3.89.
Financials are not expected to have a stellar quarter, which should help keep
expectations low for this financial giant that trades at just 11 times forward
Expectations are for Goldman to grow earnings at 9.4% this year on decreasing
The majority of analyst action has been bullish and we have seen estimates on
the rise for the current quarter as well as FY 2013 and FY 2014 since
Goldman's last report. Q2 estimates have come down slightly to $2.93 from
– Goldman reports earnings on April 16th.
Blackstone Group (NYSE:BX) is a Zacks Rank #3 stock with a positive earnings
ESP of 5.66% for the current quarter. The Zacks consensus estimate is for Q1
EPS of $0.53 with the most accurate estimate coming in at $0.56.
Like the rest of the finance sector, expectations are muted for this global
investment and advisory firm as it only trades at 9.45 times forward earnings.
What I find interesting and compelling is that the company is expected to see
almost 20% earnings growth in 2013 on a 25.2% rise in revenues; not the sort
of growth outlook expected for such a modest valuation. The current PEG ratio
is rather low at 0.48.
– Blackstone reports earnings on April 18th.
ESP Earnings Results
Now that you know which groups of stocks to focus on to increase your chances
of a positive surprise, let's look at the size of the ESP that has
historically generated the best results.
First, just having a positive ESP produces market beating results. Over the
last 10 years, using a 1 week holding period (stocks were held for no more
than one week after they reported), the average annual return was 23.5%. This
is in stark contrast to stocks with a negative ESP which produced a -9.20%
Now apply the Zacks Rank of 1, 2 or 3 to that list and the returns jump to
If you require your stocks to have an ESP of greater than 1%, we found it
increased performance to 29.6%. An ESP of greater than 2% bumps performance up
to 31.6%. While an ESP of greater than 3%, produces an average annual return
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