Will KLA Beat Estimates Again in Its Next Earnings Report?

Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering KLA KLAC, which belongs to the Zacks Electronics - Miscellaneous Products industry.

When looking at the last two reports, this maker of equipment for manufacturing semiconductors has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 7.52%, on average, in the last two quarters.

For the last reported quarter, KLA came out with earnings of $6.60 per share versus the Zacks Consensus Estimate of $6.08 per share, representing a surprise of 8.55%. For the previous quarter, the company was expected to post earnings of $4.94 per share and it actually produced earnings of $5.26 per share, delivering a surprise of 6.48%.

With this earnings history in mind, recent estimates have been moving higher for KLA. In fact, the Zacks Earnings ESP for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its nice Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

KLA currently has an Earnings ESP of +0.46%, which suggests that analysts have recently become bullish on the company's earnings prospects. This positive Earnings ESP when combined with the stock's Zacks Rank #3 (Hold) indicates that another beat is possibly around the corner.

With the Earnings ESP metric, it's important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.

Many companies end up beating the consensus EPS estimate, though this is not the only reason why their shares gain. Additionally, some stocks may remain stable even if they end up missing the consensus estimate.

To read this article on Zacks.com click here.