Catch up on the trend ahead of next week’s release

Catch up on the trend ahead of next week’s release

The market expects Cinemark Holdings ( CNK ) to deliver a year-over-year increase in earnings with higher revenue when it reports results for the quarter ended December 2023. This widely held consensus view is important in assessing the outlook of the company’s earnings, but a powerful factor that can affect the short-term stock price is how actual results compare to these estimates.

The earnings report, which is expected to be released on February 16, 2024, could help the stock move higher if these key numbers are better than expectations. On the other hand, if they are missing, the stock may move lower.

While management’s discussion of business conditions on the earnings call will largely determine the sustainability of the immediate price change and future earnings expectations, it pays to have a handicapping insight into the chances of a positive EPS surprise.

Zacks Consensus Estimate

This movie theater owner is expected to post a quarterly loss of $0.17 per share in its next report, representing a year-over-year change of +79.3%.

Revenue is expected to be $609.03 million, up 1.6% from the year-ago quarter.

Review rating trend

The EPS consensus estimate for the quarter has been revised 330.59% lower over the past 30 days to the current level. This is essentially a reflection of how covering analysts have collectively re-evaluated their initial estimates over this period.

Investors should note that the direction of rating revisions by each of the covering analysts may not always be reflected in the aggregate change.

Earnings Whisper

Valuation reviews prior to a company’s earnings release provide data on business conditions for the period for which results are being released. This insight is at the core of our proprietary surprise forecasting model — the Zacks Earnings ESP (Expected Earnings Forecast).

The Zacks Earnings ESP compares the most accurate estimate to the Zacks Consensus Estimate for the quarter; The most accurate estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts who revise their estimates immediately before an earnings release have the latest information, which could potentially be more accurate than they and others who contributed to the consensus had previously predicted.

Thus, a positive or negative reading of the Earnings ESP theoretically indicates the potential deviation of actual earnings from the consensus estimate. However, the predictive power of the model is significant only for positive ESP readings.

A positive Earnings ESP is a strong predictor of earnings growth, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of earnings ESP.

Please note that a negative earnings ESP reading is not indicative of a loss of earnings. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How are the numbers for Cinemark formed?

For Cinemark, the consensus estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently turned bearish on the company’s earnings prospects. This has resulted in an ESP of Earnings of -44.56%.

On the other hand, the stock currently carries a Zacks Rank of #4.

So this combination makes it difficult to definitively predict that Cinemark will beat the EPS consensus estimate.

Is there any clue to the earnings surprise story?

Analysts often consider the extent to which a company has been able to match consensus estimates in the past when calculating their estimates of its future earnings. So it’s worth taking a look at the surprise story to gauge its impact on the next issue.

For the last reported quarter, Cinemark was expected to post earnings of $0.47 per share when it actually produced earnings of $0.61, delivering a surprise of +29.79%.

Over the past four quarters, the company has beaten consensus EPS estimates three times.

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Earnings growth or loss may not be the only basis for a stock moving up or down. Many stocks end up losing ground despite an increase in earnings due to other factors that frustrate investors. Similarly, unforeseen catalysts help a number of stocks gain despite missing earnings.

That said, bets on stocks that are expected to beat earnings expectations increase the odds of success. That’s why it pays to check a company’s earnings ESP and Zacks Rank before its quarterly release. Be sure to use our ESP earnings filter to discover the best stocks to buy or sell before they report.

Cinemark doesn’t seem like a compelling candidate to take the profits. However, investors should also pay attention to other factors to bet on this stock or stay away from it before its earnings release.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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