Know the trend before the first quarter release

The market expects Aytu BioPharma Inc. (AYTU) to report year-over-year earnings growth due to higher sales when it announces results for the quarter ended September 2021. This widely known consensus forecast is important in assessing the company's earnings position, but an important factor that could affect the stock price in the near future is how actual results compare to these estimates.

If these key numbers beat expectations in the upcoming earnings report, the stock could rise. However, if they fall short, the stock could fall.

While the sustainability of the immediate price change and future earnings expectations will largely depend on management's discussion of business conditions during the earnings call, it is worth assessing the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The company is expected to report a quarterly loss of $0.08 per share in its upcoming report, representing a year-over-year change of +80%.

Revenue is expected to be $23.8 million, an increase of 76% over the prior year quarter.

Trend of estimate revisions

The consensus earnings per share estimate for the quarter has remained unchanged over the past 30 days, largely a reflection of analysts' collective reassessment of original estimates during this period.

Investors should keep in mind that an overall change may not reflect the direction of each individual analyst's estimate revisions.

Price, consensus and EPS surprise

Whispers of results

Estimate revisions prior to earnings releases provide insight into business conditions for the period in which earnings are released. These insights form the core of our proprietary surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction).

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 Estimate for earnings per share. The idea is that analysts who revise their estimates just before earnings are released have the latest information, which may be more accurate than what they and others contributing to the consensus had previously predicted.

A positive or negative Earnings ESP value theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is only significant for positive ESP values.

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

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

How have the numbers developed for Aytu BioPharma Inc.?

For Aytu BioPharma Inc., the Most Accurate Estimate is the same as the Zacks Consensus Estimate, which suggests that there are no recent analyst opinions that differ from those used to derive the consensus estimate. This has resulted in an Earnings ESP of 0%.

On the other hand, the stock currently has a Zacks Rank of #5.

Because of this combination, it is difficult to conclusively predict whether Aytu BioPharma Inc. will beat the consensus earnings per share estimate.

Do past earnings surprises provide any insight?

When calculating estimates for a company's future earnings, analysts often take into account the extent to which the company has been able to meet previous consensus estimates, so it's worth taking a look at the history of surprises to gauge their impact on upcoming numbers.

For the last reported quarter, Aytu BioPharma Inc. was expected to report a loss of $0.16 per share. The actual loss was $0.67, representing a surprise of -318.75%.

Over the past four quarters, the company has beaten consensus earnings per share estimates three times.

Bottom line

An above- or below-average earnings forecast is not necessarily the only reason a stock's price rises or falls. Many stocks lose ground despite above-average earnings forecasts because other factors disappoint investors. Likewise, unforeseen catalysts contribute to many stocks gaining despite below-average earnings forecasts.

However, betting on stocks that beat earnings expectations increases the odds of success. That's why it's worth checking a company's Earnings ESP and Zacks Rank before quarterly earnings are released. Be sure to use our Earnings ESP filter to find the best stocks to buy or sell before they're released.

Aytu BioPharma Inc. does not seem to be a compelling candidate for an earnings boost, but investors should also pay attention to other factors when betting on or staying away from this stock ahead of its earnings release.

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