Can Kulicke and Soffa (KLIC) Run Higher on Rising Earnings Estimates?

Investors might want to bet on Kulicke and Soffa (KLIC), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this semiconductor equipment maker, 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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

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.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Kulicke and Soffa, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $0.67 per share for the current quarter represents a change of +228.9% from the number reported a year ago.

The Zacks Consensus Estimate for Kulicke and Soffa has increased 134.78% over the last 30 days, as one estimate has gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $2.68 per share represents a change of +1,176.2% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Kulicke and Soffa. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 122%.

Favorable Zacks Rank

The promising estimate revisions have helped Kulicke and Soffa earn a Zacks Rank #1 (Strong 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 Line

Kulicke and Soffa shares have added 29.5% 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.

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This article originally published on Zacks Investment Research (zacks.com).

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