Will Allison Transmission (ALSN) Beat Earnings Estimates Again?

Investors looking for a reliable stock that has consistently outperformed earnings estimates might want to focus on Allison Transmission (ALSN), a leading name in the Zacks Automotive - Original Equipment industry. This company has shown impressive results in past quarters and appears to be in a strong position for its upcoming quarterly report.

Consistent Earnings Outperformance

In the last two earnings reports, Allison Transmission has demonstrated a solid trend of beating earnings estimates. On average, the company exceeded these estimates by 2.74% in the last two quarters alone. For its most recent quarter, Allison reported earnings of $2.13 per share, surpassing the Zacks Consensus Estimate of $2.04 per share, which indicates a surprise of 4.41%. In the quarter before that, the company had been expected to earn $1.88 per share but actually posted $1.90 per share, resulting in a surprise of 1.06%.

Favorable Earnings Estimates

This strong performance history has contributed to positive adjustments in earnings estimates for Allison Transmission. Currently, the Zacks Earnings ESP (Expected Surprise Prediction) for the stock is positive, which signals a good chance of an earnings beat. This is particularly promising when combined with a solid Zacks Rank.

Research indicates that stocks demonstrating both a positive Earnings ESP and a Zacks Rank of #3 (Hold) or higher have a nearly 70% success rate in producing positive surprises. In practical terms, if you evaluate ten stocks featuring this combination, approximately seven may exceed the consensus earnings estimate.

Understanding Earnings ESP

The Zacks Earnings ESP measures the difference between the Most Accurate Estimate and the Zacks Consensus Estimate for the earnings report in question. The Most Accurate Estimate is a refined version that reflects the most recent changes made by analysts. This method assumes that lately revised estimates hold the most current and potentially accurate data, compared to prior consensus predictions.

As of now, Allison Transmission has an Earnings ESP of +1.20%, indicating that analysts are becoming more optimistic about the company’s near-term earnings outlook. Coupled with its Zacks Rank of #3 (Hold), these indicators suggest that another earnings beat could be on the horizon. The company is expected to release its next earnings report on October 29, 2024.

Interpreting Earnings ESP Values

It is important to note that when the Earnings ESP is negative, the predictive accuracy of this metric decreases, although a negative rating does not guarantee that a stock will miss earnings expectations. Many companies can surpass the consensus EPS estimate, yet this alone does not ensure their stock prices will rise. Conversely, some stocks might maintain their value even after not meeting the consensus estimate.

Therefore, investors should take the time to check a company’s Earnings ESP before its quarterly release to enhance their chances of success. Utilizing an Earnings ESP Filter can help identify the best stocks to consider, whether for buying or selling, ahead of their earnings announcements.

Earnings, Estimates, Performance