The market expects Toronto-Dominion Bank (TD) to deliver a year-over-year decline in earnings on lower earnings when it reports results for the quarter ended October 2023. This widely known consensus outlook is important in assessing the company’s earnings picture. , but a powerful factor that could affect its near-term stock price is how the actual results compare to these estimates.
The earnings report, which is expected to be released on November 30, 2023, could help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower.
While the sustainability of the immediate price change and future earnings expectations will largely depend on management’s discussion of business conditions on the earnings call, it is worth preventing the likelihood of a positive EPS surprise.
Zacks Consensus Estimate
This retail and wholesale bank is expected to post quarterly earnings of $1.39 per share in its next report, which represents a year-over-year change of -15.2%.
Revenues are expected to be $9.02 billion, down 22.9% from the year-ago quarter.
Rating Reviews Trend
The consensus EPS estimate for the quarter remained unchanged over the last 30 days. This is essentially a reflection of how the covering analysts have collectively re-evaluated their initial estimates during this period.
Investors should keep in mind that an aggregate change may not always reflect the direction of rating revisions by each of the covering analysts.
Income Whisper
Ratings reviews prior to a company’s earnings release offer clues about business conditions for the period whose results are being released. This insight is at the heart of our own surprise forecasting model – the Zacks Earnings ESP (Expected Surprise 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 revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had previously predicted.
Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is significant for positive ESP readings only.
A positive Earnings ESP is a strong predictor of earnings momentum, 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 almost 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 an earnings miss. 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 Did the Numbers Form for Toronto Dominion?
For Toronto-Dominion, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently turned bearish on the company’s earnings outlook. This resulted in an Earnings ESP of -0.66%.
On the other hand, the stock currently carries a Zacks Rank of #3.
So this combination makes it difficult to definitively predict that Toronto-Dominion will beat the consensus EPS estimate.
Does Earnings Surprise History Hold Any Clues?
When calculating estimates for a company’s future earnings, analysts often consider how well it has been able to match past consensus estimates. So, it is worth looking at the surprising history to assess its influence on the next number.
For the last reported quarter, Toronto-Dominion was expected to post earnings of $1.52 per share when it actually produced earnings of $1.48, delivering a surprise of -2.63%.
Over the past four quarters, the company has beaten consensus EPS estimates twice.
Bottom Line
An earnings hit or miss may not be the only basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help some stocks gain despite an earnings miss.
That said, betting on stocks that are expected to have winning expectations increases the probability of success. This is why it’s worth checking a company’s Earnings ESP and Zacks Rank before its quarterly release. Be sure to use our Income ESP Filter to discover the best stocks to buy or sell before they report.
Toronto-Dominion does not seem like a compelling revenue candidate. However, investors should pay attention to other factors as well to bet on this stock or stay away from it before its earnings release.
Stay informed about upcoming earnings announcements with the Zacks Earnings Calendar.
Zacks Unveils ChatGPT “Sleeper” Stock
One little-known company is at the heart of an especially bright Artificial Intelligence sector. By 2030, the AI industry is projected to have an Internet and iPhone-scale economic impact of $15.7 Trillion.
As a service to readers, Zacks provides a bonus report that names and explains this explosive growth and 4 other “must buys.” More more.
Download Free ChatGPT Supply Report Right Now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Toronto Dominion Bank (The) (TD) : Free Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.