Methanex (MEOH) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this methanol supplier, 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 -- has this insight at its core.
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 Methanex, 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 EPS
Current-Quarter Estimate Revisions
The company is expected to earn $4.00 per share for the current quarter, which represents a year-over-year change of +312.4%.
The Zacks Consensus Estimate for Methanex has increased 13.87% 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 company is expected to earn $9.18 per share, representing a year-over-year change of +352.2%.
The revisions trend for the current year also appears quite promising for Methanex, with two 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 6.39%.
Favorable Zacks Rank
The promising estimate revisions have helped Methanex 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.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for Methanex have attracted decent investments and pushed the stock 7.8% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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