Investors might want to bet on Aaon (AAON), 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 maker of air conditioning and heating 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.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for Aaon, 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 $0.50 per share for the current quarter represents a change of +127.3% from the number reported a year ago.
Over the last 30 days, the Zacks Consensus Estimate for Aaon has increased 5.59% because one estimate has moved higher while one has gone lower.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $2.23 per share, representing a year-over-year change of +65.2%.
The revisions trend for the current year also appears quite promising for Aaon, with three estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 11.48%.
Favorable Zacks Rank
The promising estimate revisions have helped Aaon earn 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 Line
Investors have been betting on Aaon because of its solid estimate revisions, as evident from the stock's 53% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.
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AAON, Inc. (AAON): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).