Surging Earnings Estimates Signal Upside for Applied Materials (AMAT) Stock

Applied Materials (AMAT) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this maker of chipmaking equipment, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.For Applied Materials, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:12 Month EPSCurrent-Quarter Estimate RevisionsThe earnings estimate of $3.15 per share for the current quarter represents a change of +27.0% from the number reported a year ago.Over the last 30 days, the Zacks Consensus Estimate for Applied Materials has increased 14.4% because four estimates have moved higher compared to no negative revisions.Current-Year Estimate RevisionsThe company is expected to earn $11.75 per share for the full year, which represents a change of +24.7% from the prior-year number.There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, eight estimates have moved up for Applied Materials versus no negative revisions. This has pushed the consensus estimate 5.8% higher.Favorable Zacks RankThanks to promising estimate revisions, Applied Materials currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.Bottom LineApplied Materials shares have added 5.6% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks